Inflation up at 3.6% in China this March

Official data on Monday showed that China?s inflation rate edged up in March as compared to February. However, analysts said that expect the downward trend in the inflation rate to continue.

With bad weather conditions pushing up food prices and authorities raising fuel prices, the consumer price index (CPI) rose slightly higher than analysts' expectations ? from 3.2 percent in February to 3.6 percent in March.

Inflation in China, which touched a high of 6.5 percent in July 2011, has gradually slowed since. Inflation has been among China's greatest economic concerns due to the potential for social unrest caused by rising prices.

"CPI was mainly pushed up by food prices, which resulted from an undersupply of vegetables due to relatively cold weather in March," Li Huiyong, a Shanghai-based analyst at Shenyin Wanguo Securities, told AFP.

Food prices rose 7.5 percent in March, once again creating concerns for the government as China's most sensitive populations were affected.

While the government's move to hike fuel prices twice since the beginning of 2012 also contributed to rising costs, Li said that the overall "downward trend" of China's inflation rate was likely to continue.

"We think the downward trend will likely be unchanged, with the CPI bottoming out in July this year," he said.

Despite the price rise in April, analysts expect inflation in China to remain under four percent this year with the lowest rate in February ever since 2010.

Speaking at the opening of the annual session of parliament in March, Premier Wen Jiabao warned that consumer prices remained high and said the government's aim was to contain inflation within four percent in 2012.

With the country?s growth showing signs of slowing, the government has been looking to ease credit conditions to boost exporters and small and medium-sized enterprises affected by the global economic slowdown.

In the past four months, Beijing has twice lowered the banks' reserve requirement ratio. This has effectively increased the amount of money that banks can lend. Moreover, analysts said they expect further such moves in the coming months.??

"There's still room for the central bank to lower reserve ratio requirements soon," said Tang Jianwei, an economist with the Bank of Communications, based in Shanghai.

The producer price index, a leading indicator of consumer prices, fell 0.3 percent year-on-year in March. This index is a measure of the cost of goods at the farm and the factory gate.

China has slashed its economic growth target to 7.5 percent this year from 8 percent last year. The government has officially acknowledged that China?s export-driven economy is slowing as a result of Europe?s debt crisis and sluggish economic recovery in the US.

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