hina's politically sensitive inflation eased to a 14-month low in August while export growth dipped, the government reported Wednesday, and analysts said Beijing might shift from fighting price rises to revving up the slowing economy.
Chinese leaders have made a priority of fighting an inflation surge that began in mid-2007 and have imposed price controls and credit curbs. But they face an unexpectedly sharp downturn in economic growth, which could cost jobs and fuel social tensions.
Consumer prices rose 4.9 percent in August over the same month last year, the National Bureau of Statistics said. That was down from July's 6.3 percent and well below February's 8.7 percent rate — the peak of the inflation surge.
China's trade surplus hit a record $28.7 billion in August, but export growth slowed to 21.1 percent, down from July's 26.9 percent, the government reported.
Wednesday's data "suggest that policymakers will continue to take a prudent and gradual approach in shifting its policy focus from inflation to growth," said Lehman Brothers economist Minchun Sun.
Chinese stocks edged up on the news. The benchmark Shanghai Composite Index finished the day up 0.2 percent.
Analysts have cut growth forecasts this year to as low as 9 percent, down from 2007's explosive 11.9 percent. That still would be the fastest rate for any major country, but Beijing wants to keep growth high to reduce poverty and create new jobs.
"There are increasing noises that this tightening policy has lasted too long, and more and more worries about growth skidding seriously," said Standard Chartered economist Stephen Green in a report to clients.
Green cautioned that despite the impressive trade figures, Chinese exporters face tougher times ahead.
"As Europe now slows, though — the biggest destination for exports — this will change in the last few months of the year," he said. "This may well be the lull before the storm."
Adding to pressure to improve business conditions, Chinese companies were squeezed in August as wholesale inflation accelerated to a new 12-year high of 10.1 percent, according to the government data.
Beijing reacted to a similar decline in export growth in June by increasing tax rebates to textile producers. Economic planners are expected to roll out measures targeting other struggling industries.
China's trade surplus grew by 14.2 percent in August from a year ago, topping the previous monthly high of $27 billion in October 2007. Exports reached $134.9 billion, while imports rose 23.1 percent to $106.18 billion.
China's inflation surge was blamed on shortages of pork and grain. Beijing responded with price controls and subsidies to raise farm production. But its efforts were hampered by winter storms, a jump in oil prices and China's devastating May 12 earthquake.
Food prices rose sharply in August, climbing by 10.3 percent, but that was down from July's 14.4 percent and well below February's peak of 23.3 percent.
"The continuous decline of the CPI is a positive sign as it shows that the government's measures to ease inflationary pressures were effective," said the bureau's chief economist, Yao Jingyuan, quoted by the official Xinhua News Agency.
Communist leaders worry about the political impact of high inflation in a society where families spend up to one-third of their incomes on food. Bouts of high inflation in the 1980s and '90s sparked protests.
The recent rise in wholesale costs adds to pressure on Chinese companies to raise retail prices. But many are in industries with intense competition that prevents them from passing on higher costs to consumers.
That is squeezing corporate profits and could lead to job losses.
"The focus in terms of inflation has shifted toward non-food prices," said Jing Ulrich, chairwoman of China equities for JP Morgan Securities, in a report. "With power shortages occurring in many parts of the country, anticipated further hikes in energy prices would feed into higher costs for various items."
China's trade surplus with the United States grew 16.6 percent to $17.5 billion in August, the government reported. The gap with the 27-nation European Union, China's biggest trading partner, swelled 25 percent to $16 billion.
Also in August, monthly growth in spending on factories and other assets, a key economic stiumulus, accelerated to 27.4 percent, the government said.
9/10/2008 5:53 AM
By JOE McDONALD
AP Business Writer
BEJING
hina's politically sensitive inflation eased to a 14-month low in August while export growth dipped, the government reported Wednesday, and analysts said Beijing might shift from fighting price rises to revving up the slowing economy.
