China’s incoming leadership team has been given a small respite from the country’s economic pressures, with statisticians reporting a further dip in inflation last month and creeping increases in other measures of the country’s economic health.
An inflation rate of 1.7 per cent in October was lower than anticipated, and down 0.2 percentage points from the previous month; deflation in the producer-price index measuring factory costs also eased, to –2.8 per cent. Industrial production, fixed-asset investment and retail sales all recorded modest gains over the previous month.
The numbers come as Beijing’s centre has shut down completely for the 18th annual Communist Party Congress, a 10-day affair which will see the party’s General Secretary Hu Jintao step down to be replaced by current vice president Xi Jinping. Mr. Xi is expected to formally ascend to the presidency in March.
Policy makers now have extra room to manoeuvre in their efforts to shore up growth, analysts said yesterday, particularly welcome news as President Hu yesterday restated China’s goal of doubling its 2010 GDP by 2020, as well as plans to double per-capita incomes in both cities and the countryside.
But with the economy seemingly showing signs of recovery, no immediate and dramatic moves are thought to be needed.
“Although inflation will start to creep back up in the coming months, the outlook remains benign and should leave enough room for Beijing to maintain its current easing bias to consolidate China’s growth recovery,” wrote Qu Hongbin and Sun Junwei at HSBC Global Research.
Industrial production increased 9.6 per cent year on year, while fixed asset investment rose 20.7 per cent and retail sales climbed slightly to 14.5 per cent. Analysts also said inflation is expected to pick up in coming months, reflecting a recovery in non-ferrous metal prices and the rising price of crude which will drive factory costs up.
“Given that consumer price inflation is expected to trend higher by year end the government will be wary of enacting additional stimulus measures. It is increasingly clear that the economy is rebounding and this should result in higher retail spending and a possible revival of the property market, and so the government is likely to see the effects of past measures before enacting more,” economist Alaistair Chan of Moody’s Analytics wrote in a research note.
Chinese policy makers, who have opted for interest rate cuts and increasing liquidity in money markets over grander stimulus spending plans in recent months, have not ruled out more room for adjustment, fearing further ill winds from Europe and North America.
“There is still room for adjusting the domestic policy based on our research an observation. There are big uncertainties in the impact from the outside. We cannot be entirely sure about where [the global economy] is heading,”said People’s Bank of China governor Zhou Xiaochun on Thursday, on the sidelines of the Congress, telling reporters then that October data showed signs of improvement.
“The trend of the domestic economy is evolving in a good direction. We will keep continuity and flexibility in next year’s policy.”