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China's Tame Inflation Provides Ample Policy Room

Sustainability Economics +3 more

CHINA - Increased food prices drove China's inflation at retail level to rise at a faster pace in March than the previous month, but the inflation pressure still remained subdued and gave policymakers enough room to mull economic policy action.

China's consumer price index (CPI), a main gauge of inflation, increased 2.4 per cent year on year in March, up from 2 per cent in the February, official data showed on Friday.

The acceleration in inflation was mainly attributed to faster growth of food prices, said Yu Qiumei, a senior statistician with the National Bureau of Statistics (NBS).

Food prices account for nearly one-third of the weighting in the calculation of China's CPI. They gained 4.1 per cent from a year earlier and contributed 1.35 percentage points to March's CPI growth, according to NBS figures.

Prices of fruit, aquatic products, vegetables and grain went up year on year in March, with fruit prices surging 17.3 per cent and those of vegetables jumping 12.9 per cent.

Tang Jianwei, a researcher at the Bank of Communications, attributed the continued monthly CPI growth partly to the so-called carryover effect, as the prices a year earlier remained at a relatively low level.

Bucking the trend, prices of poultry and meat declined in March year on year, with the price of pork, China's staple meat, down 6.7 per cent.

Prices of non-food products and services edged up 1.5 per cent in March from a year ago, boosted by prices of utilities including electricity and gas, tours and outings, and rent.

However, China's CPI declined 0.5 per cent in March from February mainly due to a food price drop, as Chinese people traditionally have bigger demand for vegetables, meat and fruit during the Spring Festival, which started at the end of January and lasted through early February this year.

Mr Jianwei estimated a full-year CPI growth hovering at 2.6 per cent in 2014, as the country's economic growth will continue the moderate pace amid the weak demand both at home and abroad.

The latest NBS data also revealed that China's producer price index (PPI) contracted 2.3 per cent year on year in March, following a 2-per cent decline in February.

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