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world growth

Monday, March 9, 2009

China's growth to slow to 6.5 pct in Q1

China's growth to slow to 6.5 pct in Q1: govt think tank

SHANGHAI (AFP) — China's economy is likely to slow further to 6.5 percent in the first quarter, intensifying deflationary pressures, a government think tank said in a report published on Monday.

First-quarter economic growth will be slower than the 6.8 percent seen in the fourth quarter of last year, the State Information Centre said in a report published in the official China Securities Journal.

The government think tank also forecast the consumer price index (CPI), the main gauge of inflation, would fall 1.0 percent in the first quarter, compared with a rise of 1.0 percent in January.

China has set a full-year inflation target of four percent for 2009.

The last time the monthly CPI reading fell into negative territory was six years ago, when it slipped 0.4 percent in December 2002, according to previous government data.

Producer prices, which measure trends at the wholesale level, may drop 5.0 percent in the first quarter, the think tank said. The producer price index fell 3.3 percent in January.

Sustained price drops are alarming because they often cause consumers to delay major purchases in anticipation of still cheaper goods in the future, putting even more downward pressure on economic growth and prices.

In a separate report, the newspaper quoted Yi Gang, vice governor of the central bank, as saying consumer prices may see year-on-year declines in some months this year.

But he added that China is not seeing a classic deflationary spiral as the economy is still expanding and "the central bank has sufficient monetary tools to address deflation" and curb further price drops.

The government think tank also said exports, a pillar of the world's third largest economy, were likely to fall nine percent in the first quarter to 278.4 billion dollars while imports will drop 25 percent to 198.4 billion dollars.

It said that would lead to a 93.2 percent rise in China's trade surplus in the first quarter to 80 billion dollars.

http://www.google.com/hostednews/afp/article/ALeqM5hh-PgKTmaC-YenNZRZ1Ctf7gFrHQ

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