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Inflation eases in China, providing room for stimulus

October 15, 2012|By David Pierson
  • A vendor sells fish at a market in Hefei in China's Anhui province.
A vendor sells fish at a market in Hefei in China's Anhui province. (AFP/Getty Images )

BEIJING -- Inflation in China eased slightly in September, giving policymakers room to provide further economic stimulus packages as they try to stabilize the country’s sharpest slowdown since the 2008 financial crisis.

Consumer prices grew 1.9% from a year ago, down from 2% year-on-year growth in August. The gauge is closely watched because high inflation typically sows social discontent among China's massive working class.

The diminishing inflationary pressure comes after China said over the weekend that export growth and the money supply had expanded in September more than expected.

The data suggest that the world’s second-largest economy could be stabilizing after limping along for most of the year. A dramatic drop-off in demand for Chinese goods in Europe as well as a tightened domestic property market has deeply hindered China's growth momentum.

On Thursday, the country is set to announce third-quarter gross domestic product numbers that are expected to show growth below the official annual target of 7.5%.

China has been reluctant to tap any aggressive stimulus, as it did after the 2008 crisis. That package led to runaway inflation and a property bubble.

Experts say Beijing has also been unwilling to take bold financial steps with a once-in-a-decade leadership transition set for next month. The current leaders would rather allow their replacements to determine any major policy changes, they say.

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