Chinese inflation dips to 4.1%

Chinese inflation dipped for the fifth consecutive month in December with the consumer price index falling from 4.2% in November to 4.1%.

This slight change in inflation was despite continued government efforts to control prices, although December's 4.1% is the lowest in 15 months and over 2% below the July peak of 6.5%.

The 0.1% difference between November and December is a more minimal fall compared the the 1.3% and 0.6% drops in the previous two months. 

For the whole of 2011, inflation was at 5.4%, well above the Chinese government's target.

2012 is being seen as a crucial year for the growing economic powerhouse, with Société Générale's Albert Edwards warning that a hard landing for China in 2012 would be the climax of the financial crisis that began in 2008.

Commenting on the recent figures, Agnes Deng, manager of Baring Asset Management's Hong Kong China fund, said: 'We believe the headline inflation is likely to stay around in January due to the Chinese New Year effect, but looking ahead, will continue to ease in 1H12. We expect China’s headline CPI inflation to trend down and it could reach around 3% in mid-2012.

'The easing inflation pressure is good news and provides further room for policymakers to shift their focus towards growth concerns. Looking ahead, monetary policy will be biased towards moderate easing together with more expansionary fiscal policy to support the overall GDP growth in 2012.'