"Chinese CPI Still Negative
China's main inflation measures remained in negative territory in April, new data issued Monday show, but economists said the risk of sustained deflation in the world's third-largest economy is subsiding as bank lending surges and other economic indicators start to show improvement.
But much of the current drop reflects a comparison with a huge price spike in the first half of 2008: inflation in April last year was 8.5%. Prices of raw materials have actually been picking up in recent weeks, though they remain below last year's highs.
That reflects increasing indications that China's economy is bottoming out: Growth in fixed-asset investment and industrial output accelerated significantly in March. Chinese banks are also pumping enormous amounts of liquidity into the economy, extending 4.58 trillion yuan (around $671 billion) of new yuan loans in the first three months of 2009, nearly as much as in all of last year.