China's economy sends slowdown signals
(Reuters)
Updated: 2005-08-02 06:55

The think-tank expects consumer price inflation, which slowed to an annual rate of 1.6 percent in June, to fall by as much as 0.4 percent by the end of next year due to the revaluation.

The trend of falling prices has reignited debate in Chinese economic circles over whether deflation, which dogged the economy for several years in the late 1990s and in 2002, will return.

Several high-profile Chinese economists were quoted in state media on Monday and over the weekend as saying that industrial overcapacity would trigger mild deflation this year and next.

"Decreasing growth of the consumer price index, dropping enterprise profits, as well as losses in downstream industries are all signals that China's economy has taken a cooling trend," the Xinhua news agency quoted Wang Jian, a top researcher with the National Development and Reform Commission, as saying.

Statistics office spokesman Yao Jingyuan was quoted by the China Securities Journal as saying consumers may begin to curtail spending for fear that falling profits could lead to lay-offs.