SHANGHAI – China’s economy is cooling down, with industrial production dropping to its slowest pace in two years last month and inflation also cooling — raising the likelihood of fresh moves to keep growth on track.

A decline in inflation to 4.2 percent in November from 5.5 percent the month before, reported Friday, will allow authorities more flexibility in easing policies that were imposed to cool the overheated economy but now may pose a threat to growth.

Leaders will likely remain cautious, however, given an upcoming leadership transition next year, the uncertain global situation and concerns over the potential for inflation to rebound.

The ruling Communist Party’s powerful Politburo met and agreed Friday to keep a “pru dent” monetary policy — a catch phrase for keeping a lid on inflation — and proactive fiscal policies, the official Xinhua News Agency reported.

The National Bureau of Statistics reported that industrial output rose 12.4 percent in November, its slowest increase in two years.

China’s ability to help offset the malaise in Europe and the U.S. will depend on its ability to support growth while avoiding a relapse into higher inflation that undermines the economic gains underpinning Communist Party rule.

A recent surge in labor unrest and public dissatisfaction over the widening gap between rich and poor, corruption, pollution and other issues have added to jitters as the party prepares for a transition next year to a new generation of leadership.

Moves toward an easier monetary stance may come as early as next week at an annual economic work conference in Beijing that will set policy for the coming year. But the support will be tempered by concern that too much stimulus could touch off another round of excess investment and inflation.

In one indication of that risk, the statistics bureau reported that retail sales rose 17.3 percent year-over-year in November, up slightly from October, suggesting sustained demand in China’s domestic market even as exports to crisis-stricken Europe falter.

China’s latest bout of inflation was fueled by a stimulus-led binge in bank lending in 2009 that helped fend off the global crisis. Much of it was squandered in excessive investments in construction and real estate.

“It is inevitable that credit will be eased, but in an orderly way, not like during 2008-2009,” said Mei Xinyu, an economic researcher.

The progress on capping inflation has come as a relief to price-conscious Chinese families.

Ma Chuanyi, 59, a retired elementary school teacher whose family is remodeling an apartment, said she noticed the price of cement had fallen.

“Some vegetables and other foods are cheaper now in this season,” she said. “Household appliances also are not so expensive, thanks to discounts.”

 

Copy the Story Link