China's inflation in November 2011 dropped to the slowest pace in more than a year, giving authorities more room to adjust policies amid a slowdown of the global economy.

　　The consumer price index （CPI）， a main gauge of inflation, rose 4.2% year on year, the National Bureau of Statistics said. It is down from October's 5.5% reading and reached its lowest level since September 2010.

　　Inflation is weakening faster than the market expected, mainly due to the decrease in food prices and the tightening of the monetary policy.

　　Food prices rose 8.8% in last November from a year earlier, significantly slowing from October's data of 11.9%, contributing 2.7 percentage points to the overall growth. Non-food inflation rose 2.2% year on year, slightly down from October's reading of 2.7%.

　　Meanwhile, the producer price index （PPI）， an indicator of upstream inflation pressures, slowed even more, rising by just 2.7% in November 2011 from a year earlier, compared with a 5% rise in October, reflecting investors' weakening confidence in their business prospects.

　　Slump prices of industrial goods such as coal and rubber will further relieve inflationary pressure. Economists from Bank of Communications expect that the CPI will drop to below 4% in December, and further decrease to 3~3.5 % through 2012.

　　In another positive sign for officials, China's retail sales growth accelerated, raising 17.3% from a year earlier to 1.61 trillion yuan （about 0.25 trillion US dollars） in last November, edged up from the pace of 17.2% in October.

　　But spending on automobile sales weakened slightly, increasing by 11.4% compared with the same period of last year, down from October's growth of 12.6%, as the removal of government incentives dented demand.

　　Analysts contribute the private consumption growth partly to a rise in the individual tax threshold starting from September 1, 2011. But the increasing domestic consumption still cannot offset negative influences from the debt crisis in Europe, which has slowed China's exports significantly.

　　Growth in Chinese trade slowed in November 2011, with exports expanding 13.8% year on year, the lowest in nine months, and imports increasing by 22.1%, weaker than a rise of 28.7% in October. The monthly surplus turned out to be 14.5 billion US dollars, narrowing from October's 17 billion US dollars, customs data showed.

　　China's value-added industrial output growth also hit its lowest level in more than two years, gaining a year-on-year increase rate of 12.4 % in November, data showed, fueling concerns that the debt crisis in Europe and the sluggish US economy is hurting China's export sector.

　　The fixed asset investment, a closely watched indicator of the Chinese economy, rose 24.5% from a year earlier to 26.9 trillion yuan （about 4.16 billion US dollars） in the first 11 months of 2011, down 0.4 percentage points compared to that in the first ten months.

　　The latest economic figures have fuelled market expectations of further easing of policies to prop up faltering growth and offset deteriorating domestic and international economic conditions.

　　China will maintain its prudent monetary policy and proactive fiscal policy in 2012, but fine tune these policies as conditions change, the Political Bureau of the Communist Party of China （CPC） Central Committee announced on December 9, 2011.

　　The nation will continue to balance efforts to ensure stable and relatively fast economic growth, while adjusting the economic structure and regulating inflationary expectations this year, a statement from the central government's website said.

　　China's central bank made a sudden move to cut banks' reserve requirement ratio by 50 basis points starting December 5, 2011 to spur lending, the first move of its kind since December 2008.

　　Analysts expect there will be more cuts on the banks' reserve requirement ratio in the near future, and probably a cut in the interest rate in mid-2012, as inflation is not the main risk for China's economy and stimulating growth should be a priority.

　　The Asian Development Bank recently lowered the forecast of China's growth rate to 8.8% in 2012, 0.3 percentage points lower than the forecast in September 2011, citing reasons that the world's second-largest economy is facing much greater downside risks because of the possibility of a recession in the US and Europe, as well as the threat of destabilizing capital flows .

　　However, some experts fear that a full-scale reversal in policy settings will make money flow to the property sector and cause asset bubbles.

　　The Chinese Academy of Social Sciences also published a report in last December, warning that housing prices may rebound if the central government relaxes its administrative controls too much.

　　Instead of the massive stimulus spending ordered in late 2008 to counter the global crisis, analysts say authorities are more likely to rely on tax cuts and administrative measures to help encourage more consumer spending.