China forecasts a slowing of inflation

Helen Yuan Bloomberg News Monday, October 11, 2004

SHANGHAI Growth in Chinese consumer prices is showing signs of slowing and will ease further in the fourth quarter because of stabilizing grain prices and a glut in most domestic products, a government department said.
.The government's measures to keep price increases from accelerating are working, the National Development and Reform Commission said Saturday on its Web site. Food prices in China's major cities were stable during the weeklong national holiday, which ended last weekend.
.The average grain price, already at its highest level since 1995, will be subdued by lower international prices, the commission said. Food costs such as meat, poultry and milk will stabilize following a stable domestic grain market, it said.
.China's inflation rate was at a seven-year high of 5.3 percent in August on rising food costs. Producer prices rose 6.8 percent from a year earlier, their largest increase in eight years, the Beijing-based statistics bureau said in September.
.The government has clamped down on lending to certain industries to damp an investment boom that it blames for power shortages, clogged transport networks and accelerating inflation. U.S. officials have said that China should raise interest rates and relax the yuan's peg to the U.S. dollar to help cool the economy.
.Excessive investment has spurred increases in energy, transport and housing costs. Yet 446 of 600 main products in China remained in oversupply, the commission said in the statement.
.Food prices, which account for about a third of China's consumer price index, jumped 14 percent in August, the statistics bureau said. Grain prices surged 32 percent, meat prices gained 24 percent and the cost of eggs climbed 30 percent, it said.
.Consumer goods prices rose 6.3 percent, service costs increased 2 percent and housing prices climbed 6 percent.
.Textile curbs sought in U.S.
.U.S. textile makers have asked the Bush administration to limit increases in the import of cotton trousers from China, a Commerce Department spokeswoman, Mary Brown Brewer, said. The agency has 60 days to decide whether it will review the case and consider restricting Chinese imports.
.The textile makers' petition covers what was $280 million of imported goods last year and is the first of what the industry has promised will be dozens of trade complaints to prevent more Chinese imports when global quotas on textile and apparel expire at the end of this year.
.National Spinning, Milliken and other U.S. textile companies are warning that as many as 600,000 of the 700,000 American textile and apparel jobs will be lost next year. Once the textile quotas are eliminated, China will dominate the global trade in clothing, according to the U.S. International Trade Commission and other analysts.
.Last year the Bush administration limited the increase in imports of Chinese-made brassieres, robes and knit shirts to 7 percent a year. The specific China limits, called safeguards, were negotiated as part of that nation's acceptance into the World Trade Organization in 2001.
.Lloyd Wood, a spokesman for the industry, declined to comment. The U.S. industry has scheduled a press conference Tuesday to discuss its petitions.
.Apparel and shoe imports from China grew to more than $27 billion last year, a 50 percent increase from 1999. China will grow to supply 50 percent of U.S. clothing imports after the system ends, from 16 percent in 1995, the trade body said in an August report.

.Bloomberg News