Slowing China inflation fans concerns over global growth

Mainland inflation hit its lowest in nearly five years in the latest sign that the Chinese economy might be slowing and adding to the worldwide economic gloom, triggering a stocks sell-off in the US and Europe.

The rise in the consumer price index slowed to 1.6 per cent year on year, the National Bureau of Statistics said, the lowest since November 2009. The producer price index fell to minus 1.8 per cent in its 31st consecutive month of decline. The sustained fall shows Beijing is continuing to grapple with heavy oversupply in key sectors.

"In the coming months, we believe that risks to growth are still on the down side," HSBC said in a research note yesterday. "The inflation data suggests that there has been little improvement in domestic demand."

The falling prices of crude oil and steel put producer prices under pressure last month, NBS economists said yesterday.

JP Morgan said easing in global commodities prices had also put pressure on producer prices.

Falling prices for industrial products meant industrial profits would suffer as well. In turn, that would hurt investment in manufacturing, which reached a near 12-year low last month.