China economy unlikely to see deflation

Yahoo News
China economy unlikely to see deflation -paper
Reuters
26 November 2008

SHANGHAI, Nov 26 - China's economy is unlikely to experience deflation, while GDP growth is expected to stay above 8 percent in 2009, the official China Securities Journal said on Wednesday, quoting a researcher from a key government think-tank.

Deflation happens when money supply increases and consumer price inflation falls at the same time in stagnant economic growth, but China has not shown such signs, Fan Jianping, the chief economist at the State Information Centre, told the paper.

The economy slow-down would be likely to come to an end in the second half of 2009, so long as stimulus policies are put into effect, Fan said.

But he warned that to pursue higher growth in the short term would not benefit the long-term goal of transforming the economy's structure. The paper did not give details.

China's economic growth slowed to 9.0 percent in the third quarter against 10.1 percent in the second, hurt by the global credit crisis and a weak property sector, leaving the economy on course for its first year of single-digit expansion since 2002.

Fan also said the consumer price index , indicator of consumer price inflation, would be unlikely to fall in 2009, but the producer price index may fall in a few months of the year.

Increases in grain purchase prices and possible reform of pricing schemes on resources will prevent consumer prices from falling, while weakening energy prices in the global market and economic conditions will continue to weigh on PPI, he said.