China reports January saw lowest CPI increase in 12 months

SHANGHAI, China (AP) - China's main measure of consumer prices rose 1.9 percent in January over the same month a year earlier, the smallest increase in 12 months, the government said Tuesday. 

The report by the National Statistics Bureau suggests China's economic planners have made progress in curbing inflation, which hit a seven-year peak of 5.3 percent in July but has since subsided. 

The 1.9 percent January increase in the consumer price index, China's main barometer for inflation, compared with a 2.4 percent year-on-year increase in December and a 3.2 percent on-year rise in January 2004. 

Meanwhile, the head of China's central bank said the government would closely monitor price changes to determine its monetary policies. 

The People's Bank of China boosted interest rates for the first time in nine years in October, seeking to curb investment that authorities say was fueling inflation.  

But it has been wary of further increases that might crimp consumer demand. 

Zhou Xiaochuan, governor of the People's Bank of China, also said Beijing would keep the value of the Chinese currency, the yuan, steady. 

The comments, posted on the central bank's Web site, suggest no imminent changes in the country's foreign exchange policy despite international pressure on China to revalue its currency. 

The United States and other countries say the yuan is being held at an artificially low level, resulting in a flood of inexpensive Chinese products in overseas markets. 

The consumer price data for January was somewhat distorted by the fact that the Lunar New Year fell in January in 2004 and in February this year. Consumer prices tend to surge due to strong demand before and during the holiday. 

China's consumer price index rose 3.9 percent on-year in 2004. Price hikes partly reflected a shortfall in grain output and also surging international crude oil and commodity prices. 

The government has said it hopes to limit inflation to no more than 4 percent in 2005. 

Overall, food prices rose 4.0 percent on-year in January, while prices for grain jumped 14.2 percent on-year and meat prices rose 9.3 percent, the report said. 

Prices for clothing, household appliances, medical care, transportation and telecommunications fell, it said. 

Rate hikes for water and power pushed utilities prices up 10 percent on-year, while housing costs rose 5.5 percent, the report said. 

The producer price index, a leading indicator for inflation, rose 5.8 percent on year in January after reaching a near nine-year peak of 8.4 percent in October, as oil prices slipped, the government reported Monday. - AP

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