Inflation slowed significantly in China

Inflation in China has slowed significantly in October. Price increases ranged from 6.1 percent in September to 5.5 percent, as the Bureau of Statistics announced in Beijing.

The increase in industrial production slowed to a surprising extent to 13.2 percent. It is the lowest level this year, reported the statisticians.

The decline in inflation gives the monetary policy of the second-largest economy a little room to move again, to respond to cyclical risks such as the debt crisis in Europe and an impending slump in exports. The increase in producer prices slowed in October to a surprising extent on five percent – 1.5 percentage points lower than last month.

China’s growth will slow this year from 10.4 in the previous year to 9 percent. For 2012 only 8.7 percent are predicted. The credit-financed investment level is unsustainable. The expansion of the service industry will also slow down the productivity gains. Between 2012 and 2016, forecasts of China’s economic growth rate are only 6.6 percent annually.

The decline in inflation was welcomed. “The data for the consumer price index in October show that the the government’s price controls start to pay off,” said Zhang Liqun in the Development Research Center of State Council. The government must remain cautious and should not ignore the risk of price increases. It was a critical moment for macroeconomic control, said Zhang Liqun.

In the fight against inflation and curb lending, the central bank interest rates between October 2010 and July 2011 had increased five times and the minimum requirements for capital reserves had increased nine times to a record high of 21.5 percent.