Consumer price inflation fell for the ninth month in a row to 1 per cent in January from 1.2 per cent the previous month as prices for clothing, transport and housing tumbled. The drop in prices charged by manufacturers underscored the weakness of the economy.
Several economists forecast that consumer prices in China would begin to fall from this month. Ha Jiming, economist at China International Capital Corporation, said inflation would be -1 per cent in February and factory-gate prices would decline 6.3 per cent.
However, most analysts say China will avoid a prolonged period of deflation, which could lead to a sharp drop in output as consumers and companies delay spending, because of the aggressive monetary and fiscal stimulus policies introduced by the Chinese authorities.