China's inflation falls slightly

[suguhopes]

BEIJING, China (AP) -- China's inflation fell to a still-high 7.1
percent in June, according to data reported Thursday, possibly easing
pressure on Beijing to raise interest rates or take more drastic steps
to cool sharp rises in consumer prices.

The June rise in consumer prices over the same month of 2007, reported
by the National Bureau of Statistics, was down from May's 7.7 percent
rise. The decline followed months of government efforts to cool
inflation by increasing food supplies and imposing price controls on
food, fuel and other basic goods.

Prices are "still running at a fairly high level," statistics bureau
spokesman Li Xiaochao said at a news conference, giving no indication
that Beijing considered the problem under control.

The communist government is especially worried about the impact of
fast-rising prices on China's poor majority, who spend up to half
their incomes on food. Bouts of high inflation in the 1980s and '90s
sparked protests, a scene the government is anxious to avoid ahead of
this August's Beijing Olympics, which it hopes will showcase China as
stable and prosperous.

The economy grew by 10.1 percent in the three months ending June 30, a
decline from the previous quarter's 10.6 percent expansion, but in
line with government controls imposed in an effort to prevent runaway
growth and higher inflation, Li said.


"In 2008, China is facing challenges from both inside and outside. But
the national economy maintained stable and fast growth," Li said. "We
are moving in an effective direction. The result is really hard-
earned."

Chinese consumer prices began to rise sharply in mid-2007 due to
shortages of pork and grain. The government initially expressed
confidence inflation would start to fall by the end of that year. But
efforts to rein in prices were hampered by severe winter storms that
wrecked crops and disrupted shipping.

N.Sukumar
Research Analyst