China's inflation rate rose to 2.4 percent year-on-year in March, from 2 percent in February, driven mainly by food prices, which rose by 4.1 percent, and rent costs, up 2.5 percent, while real growth lost some of its strength, leaving some room for price liberalization.
The thing that really needs to be noted, however, is the carry-over effect which has led to a higher Consumer Price Index (CPI), while month-on-month, inflation was trending down, around 0.5 percent, indicating a lessening of price pressures in real terms.
Rising temperatures, as well as weak economic growth, can have a direct effect on the fall in prices, with vegetables, fruits, and meat all down significantly. With summer coming, the inflation situation could hopefully ease further if there are no major changes in pricing and liquidity policies.
A number of indicators point to a weakening in GDP growth and the country has come up with a mini-stimulus package to help edge the economy up and keep on track. If the trend continues, it will be easier for policymakers to hit the year's inflation control target, at 3.5 percent.
The low prices could also facilitate the price liberalization moves, which have failed to do very well over the past few years partly because of worries about high prices as a result.
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