Inflation slows in China to start new year

china cpi inflation
Inflation moderated in China last month.

After hitting a seven-month high to close out 2012, China's consumer price index dipped in January.

Chinese consumers paid 2.0% more for goods and services in January than they did a year ago, the government's National Bureau of Statistics reported Friday.

That's a slower rate than December's 2.5% annual increase, and represents tame inflation for the world's second largest economy. A year ago, the country was experiencing an annual inflation rate of 4% or higher.

Food prices also registered a slower rate of growth than in December, when unseasonably cold weather pushed prices on meat and vegetables up dramatically.

Food is an important gauge of cost of living expenses in China. It accounts for more than a third of the country's inflation calculation, and for rural families, it makes up the bulk of expenses.

The Chinese government prefers to keep its annual inflation rate below 4% -- a level it sees as consistent with healthy economic growth and consumer demand.

China's inflation data in January and February can be distorted by the timing of the Lunar New Year holiday, scheduled this year for Feb. 10.

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China has averaged economic growth of around 10% a year in the past three decades, propelling it up the list of biggest economies, generating wealth for its growing middle class and boosting global trade.

But that pace of expansion is hard to maintain, and China may be reaching a new normal of growth. China's economy grew 7.9% in the fourth quarter, compared to a year earlier.

Recently, China has felt the impact of sluggish growth in the United States and recession in much of Europe, which has depressed export demand. Government efforts to take the heat out of a real estate boom and control inflation have also had a dampening effect.

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