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CPI may weaken but trade seen dim in April

Shanghai Daily, May 8, 2012

• China's inflation may weaken in April, allowing more room for policy stimulus, but trade is likely to remain dim.

  The Consumer Price Index, a main gauge of inflation, may rise 3.4 percent in April, Lu Zhengwei, chief economist at the Industrial Bank, said yesterday.

  The Bank of Communications economist Tang Jianwei predicted a 3.3 percent increase.

  The inflation rebounded more than expected to 3.6 percent in March from the 20-month low of 3.2 percent in February.

  "Inflationary pressure is receding with lower global oil prices and cheaper pork," Lu said. "This can ease worries of policymakers and allow a reserve requirement ratio cut possibly this month."

  The world's second-largest economy still needs at least one reserve requirement ratio cut to boost liquidity and sustain growth, which showed some encouraging signs this month, analysts said.

  But trade is set to stay weak as both exports and imports may grow by a single digit in April.

  Lu predicted exports may rise 7.8 percent last month, down from March's 8.9 percent while import growth may improve from 5.3 percent to 8.5 percent, but still far below February's 39.6 percent.

  Tang was more optimistic as he projected exports to grow 7.9 percent in April and imports to rise 10.9 percent.

  Released earlier this month, the official Purchasing Managers' Index, a gauge of manufacturing activities in China, hit a 13-month high of 53.3 in April, reflecting a revival in domestic demand. A reading above 50 means expansion.

  China's gross domestic product grew 8.1 percent from a year earlier in the first three months of this year, the slowest in nearly three years.

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