Reviving economy a tightrope walk: Report

Last Updated: Tuesday, September 11, 2012 - 12:22

Beijing: China will have to walk the tightrope to revive its economy as the country is perched between rebounding inflation on one side and slowing economic activity on the other, said a Chinese daily.

An editorial in the China Daily Tuesday said that though an increase in exports in August suggested that China's trade was becoming more stable, "it cannot eliminate the possibility that the country will be faced with the dual difficulties of rising inflation and slower economic growth".

The country's exports increased by 2.7 percent year-on-year in August, a rate that failed to meet market expectations.

The daily said that policymakers, who saw inflation accelerate and industrial activity stagnate, "now find themselves in the difficult position of having to stimulate growth and tame prices at the same time".

Food prices increased by 1.5 percent month-on-month in August. Partly the result of recent bad weather, the increase also stems from consistent rises in farm costs.

The producer price index's decrease in August suggests that corporate profits are likely to be low for quite some time, sending a signal that now is too early to predict that the economy will quickly bottom out and then rebound.

"These figures make a strong case for the central government to adopt more stimulus measures to shore up the economy," said the daily.

It added: "We have seen the government take steps to ensure infrastructure projects are approved more quickly and have seen local governments adopt de facto relaxations of real estate controls."

The editorial noted that amid all this, "the looming risk of rising inflation will continue to thwart authorities' attempts to adopt stronger stimulus measures".

"Perched between rebounding inflation on one side and slowing economic activity on the other, China will have to walk a tightrope to revive its economy," it added.


First Published: Tuesday, September 11, 2012 - 12:22
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