China's inflation eases as trade gap hits record

BEJING, Sept 10 (AP) China's politically sensitive consumer inflation eased in August to a 14-month low, the government said Wednesday, and analysts said Beijing might turn from fighting price rises to revving up the slowing economy.brDemand for Chinese exports remains relatively strong. China's yawning trade surplus widened to a monthly record of $28.7 billion in August as exports rose 21.1 per cent from a year ago, authorities said.brChina's trade gap with the United States and Europe also grew - news that will likely to fuel demands by the US and the 27-nation EU for Beijing to ease trade barriers and currency controls.brBut Standard Chartered economist Stephen Green cautioned that Chinese exporters could face tougher times ahead.brThe golden times are certainly over, and many firms are suffering, but from a macro-perspective it is still remarkable that real export growth has stabilised over the summer, Green wrote in a report to clients. As Europe now slows, though - the biggest destination for exports - this will change in the last few months of the year. This may well be the lull before the storm.brInflation, meanwhile, seems to be less of a threat.brConsumer prices rose 4.9 per cent in August over the same month last year, the National Bureau of Statistics said. That was down from July's 6.3 per cent and well below February's 8.7 per cent rate - the peak of an inflation surge that began in mid-2007.brChinese leaders made a priority of fighting inflation and have imposed credit curbs and price controls on food. But they also are facing an unexpectedly sharp slowdown in China's rapid economic expansion and are trying to keep growth robust.brWednesday'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.brAnalysts have cut growth forecasts this year to as low as 9 per cent, down from 2007's explosive 11.9 per cent. That still would be by far the fastest rate for any major country, but Beijing wants to keep growth high to reduce poverty and create new jobs.brThere are increasing noises that this tightening policy has lasted too long, and more and more worries about growth skidding seriously, Green said.brAdding to pressure to improve conditions for business, Chinese companies were squeezed in August as wholesale inflation accelerated to a new 12-year high of 10.1 per cent, according to the government data.brBeijing has given tax breaks to textile producers that have seen exports drop and is expected to roll out other measures targeting struggling industries.brChina's global trade surplus - the amount exports exceed imports - grew 14.2 per cent in August from a year ago, topping the previous monthly high of $27 billion set in October 2007.brExports jumped 21.1 per cent to $134.9 billion, while imports were also up strongly, climbing 23.1 per cent to $106.18 billion.brChina's inflation surge began in mid-2007 and was initially blamed on shortages of pork and grain. The government responded with price controls and subsidies to encourage farmers to raise production. But its efforts were hampered by winter storms, a jump in oil prices and China's devastating May 12 earthquake.brFood prices rose sharply in August, climbing by 10.3 per cent, but that was down from July's 14.4 per cent and well below February's peak of 23.3 per cent.brThe 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. brCommunist 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. brThe 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. brThat is squeezing corporate profits and could lead to job losses. brThe 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. brWith the US, China's trade surplus grew 16.6 per cent to $17.5 billion during the month, the agency reported. The gap with the 27-nation European Union, China's biggest trading partner, swelled 25 per cent to $16 billion. brAlso in August, monthly growth in spending on factories and other assets, a key economic stiumulus, accelerated to 27.4 per cent, the government said.