Consumer prices climbed 1.5 percent over a year earlier, the National Bureau of Statistics reported Thursday. That was down from December's 1.9 percent rise, the highest rate in nearly two years.
The decline suggested Beijing can put off taking drastic steps such as a rate hike that would have global repercussions if it slowed China's recovery and cooled rising Chinese demand for imported industrial raw materials and consumer goods.
“The inflation data surprised us because it was a lot lower than the market expected,” said economist Liu Qiyuan of China Merchant Securities. Liu said it showed government orders to Chinese banks to curb lending without hiking rates appeared to be working and should keep inflation below 4 percent for the year.
Communist leaders worry that last year's stimulus-driven surge in government spending and bank lending might be fueling inflation and a dangerous bubble in real estate and stock prices. Banks were told in January to set aside more reserves to avert a renewed surge in credit but regulators have tried to avoid more drastic measures.
January lending by Chinese banks totaled 1.4 trillion yuan ($200 billion) after credit curbs were imposed mid-month, the central bank reported Thursday. That was nearly one-fifth of the planned total for 2010 but reflected a sharp slowdown after state media said institutions lent 600 billion yuan ($88 billion) in the first week of January alone.
China's biggest lender, state-owned Industrial and Commercial Bank of China Ltd., said this week it will curb lending to real estate and industrial projects. State media say other banks imposed temporary lending moratoriums in January to restrain credit growth.
Also Thursday, the government said housing prices rose 9.5 percent in January from a year earlier in 70 large and medium-size Chinese cities. That was up 1.3 percentage points from December's housing price rise.
The government declared China recovered from the global crisis after economic growth accelerated to 10.7 percent in the final quarter of 2009. But authorities say the global outlook is still uncertain and stimulus measures will continue.
The government indicated in January it was broadening its focus from stimulus to include controlling inflation, which authorities said had to be watched closely.
Analysts say Beijing is likely to raise rates this year.
But they say it probably will wait until the Federal Reserve raises US rates, which China would take as confirmation the American and global economies are recovering.
January inflation was driven by a 3.7 percent rise in politically sensitive food costs, including a 17.1 percent jump in vegetable prices. But that was down slightly from December's 5 percent food inflation.
Other data, however, showed there is still a danger of new price surges.
Wholesale inflation in January accelerated to 4.3 percent, up from December's 1.7 percent rate, meaning consumers might face further price hikes as retailers pass on higher costs.
China was the healthiest major economy heading into the crisis in 2008 and was widely expected to be the first to emerge. Its banks were unhurt by mortgage-related turmoil that battered Western lenders and government debt was low compared with other major economies.
That gave Beijing latitude to launch a 4 trillion yuan ($586 billion) stimulus that pumped money into the economy through public works spending, tax cuts, subsidies to car buyers and aid to industries.
