More room to move

Su told Xinhua on the sidelines over the weekend, during the annual sessions of the country's legislative and political advisory bodies, that China still had plenty of room to maneuver using monetary policy in the face of the global financial crisis.

He said the benchmark deposit and loan interest rates had been reduced five times since September and room for further adjustment was "smaller but still exists."

There's also "much room for cutting banks' reserve requirement ratios," which had been reduced four times since September, Su said.

China has set a full-year inflation target of 4 percent for 2009.

"The four percent target implies the highest inflation level China could endure this year," said Zuo. There was no danger of inflation in the next two or three years, she said, while deflation pressure was rising.

Offsetting declines

Zhuang Jian, senior economist with the Asian Development Bank's China resident mission, said declining prices could hurt corporate profit margins and reduce their desire to expand production.

The declines are "an indicator of falling confidence amid the economic slowdown," said Ai Hongde, president of the Dongbei University of Finance and Economics.

"The falling prices indicate some industries have excess production, while consumers are unwilling to spend at will," he said.

He suggested the government should do more to boost personal spending, which should function along with the massive investment plans.

Deflationary pressure could ease in the second half of the year if consumption was boosted, he said.

Zuo said falling prices provided an opportunity for the government to further ease controls on commodity prices, especially those of farm produce.

(Xinhua News Agency March 10, 2009)