Against the grain

10 February 2009 By John Foley Follow @johnsfoley

Inflation was a menace in China only a few months ago. Now it is falling so fast that deflation could be a threat. Along with falling exports and a wave of 20m jobless migrant workers, volatile prices are another unwanted ball for the authorities to keep in the air.

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China's consumer prices were 1% higher in January than in same period last year. The annual inflation rate was the slowest rate in 30 months, according to data from China's National Bureau of Statistics. Food price inflation rebounded slightly to 4.2%, compared with 4% in December.

Nonfood prices fell 0.6% year on year, driven by falls in clothing, which fell 2.7%, as well as declining fuel and utility bills. Producer prices, which tend to lag changes in global commodity prices by a few months, fell 3.3% triple December's decline.

Chen Xiwen, director of China's Office of Central Rural Work Leading Group, estimated last week that around 20m of China's migrant workers, or 15%, have returned home having lost their job or been unable to find employment in the last year.

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