China's inflation rate eases to 2.5 per cent in December, price rise for full year 2.6 per cent

BEIJING, China – China’s inflation rate eased in December to 2.5 per cent amid signs the world’s second-largest economy might be cooling.

The consumer price rise reported Thursday was down from November’s 3 per cent. Inflation for the full year of 2013 was 2.6 per cent, below the ruling Communist Party’s target of 3.5 per cent.

Lower inflation could ease pressure on Chinese leaders as they try to focus on promised reforms aimed at making the economy more productive and keeping growth strong.

China’s economic growth dropped to a two-decade low of 7.5 per cent in the second quarter of last year. It rebounded the following quarter but analysts say the recovery is likely to fade.

Manufacturing declined in December, which some analysts said suggests growth already is weakening.

Chinese leaders promised in November to open government-dominated industries wider to private competitors, though they said state ownership will remain the core of the economy.

The December consumer price rise was driven by a 4.1 per cent increase in food costs. The price of fresh fruit rose 15.6 per cent but increases for other commodities were modest.

Producer prices, measured as goods leave the factory, fell 1.4 per cent from a year earlier in a reflection of slack demand. For the full year, producer prices fell 1.9 per cent.

The government is trying to reduce reliance on trade and investment by encouraging domestic consumption but consumer spending is growth more slowly than leaders hope.

Beijing is in the midst of a marathon campaign to reduce excess production capacity in industries including steel, solar panels and cement in which supply exceeds demand. That glut of production has led to price-cutting wars that have forced some companies into bankruptcy.