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China Inflation Eases Again; Producer Prices Extend Decline

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China's consumer price inflation eased for a second consecutive month in December to reach its weakest level in seven months, the latest figures from the National Bureau of Statistics revealed Thursday.

Meanwhile, China's producer prices extended its decline to 22 months in December, fueling concerns about industrial overcapacity.

The annual consumer price inflation fell to 2.5 percent in December from 3 percent in November. Economists had forecast a slowdown to 2.7 percent. On a monthly basis, the consumer price index rose 0.3 percent.

In the whole of 2013, inflation was 2.6 percent, well below the government's target of 3.5 percent.

In December, food price inflation slowed to 4.1 percent from 5.9 percent in November, while non-food prices rose 1.7 percent. The People's Bank of China has refrained from monetary easing in the view of potential upside risks from the housing market as well as the ongoing reforms in the economic and financial sectors.

The producer price index fell 1.4 percent year-on-year in December, at the same pace as in November. The decline was slightly steeper than the 1.3 percent drop expected. In the full year of 2013, the PPI fell 1.9 percent.

Premier Li Keqiang has pledged to curb industrial overcapacity, which economists believe, is driving down producer prices, thus hurting firms' profits.

The government has pledged to maintain stable price levels while pressing ahead with the economic reforms.

The Chinese economy expanded 7.8 percent in the third quarter, the fastest pace this year, government data showed in October. The statistical office is scheduled to release the fourth quarter GDP data on January 20. Chinese customs office will release December's foreign trade data on January 10.

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