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China's Inflation Eases to Two-Year Low

  • VOA News

China's inflation rate has eased to its lowest level in more than two years, giving Chinese authorities more policy options to boost the slowing growth in the world's second biggest economy,
Chinese government data released Monday show the consumer price index rose 2.2 percent in June from the previous year, a smaller increase than the 3 percent inflation recorded in May. June's figure also marks China's lowest monthly inflation since January 2010.
Weaker inflation can allow governments to act more aggressively to stimulate economic growth, either by cutting interest rates or boosting public spending. China's economy grew 8.1 percent in the first quarter of this year, its slowest pace in about three years. Slowing growth in China could hurt demand for imports of consumer goods from the United States, Europe and other struggling economies.
China's central bank has cut interest rates twice since the start of June. Chinese Premier Wen Jiabao said Sunday the government must take further steps to stimulate growth because of what he described as major downward pressure.
Stephen Schwartz, chief Asia economist at the Hong Kong-based Banco Bilbao Vizcaya, told VOA that China's inflation is likely to decline further to 2 percent in July and August, before picking up slightly later in the year.

But, he also added a word of caution. "The decline in inflation we've seen in the last few months including in June is due to falling food prices and those are quite volatile and can be reversed easily. So while inflation as a threat is really off the table now, I'm sure the authorities are going to be mindful of a pickup later in the year," he said.
Reports on China's second quarter economic growth and industrial production, trade and retail sales are due to be released this week.

Some information for this report provided by AP, AFP and Reuters.