The collapse in global and local commodity prices drove China's consumer-price inflation to its lowest rate in nearly two years in November. It is now more likely inflation in China will be in negative territory or close to it by early next year, adding to pressure on the government to shore up demand to bolster China's weakening economy.

 

 

 

 

 

 

 

 

 

 

 

 

The consumer-price index in November was 2.4% higher than a year ago, down from October's 4.0% reading and far below this year's peak of 8.7%. ...

 

 

 

 

 

 

 

 

 

 

 

 

Nonfood inflation, China's closest equivalent to a measure of core inflation, dropped to 0.6% year-on-year in November, the lowest level since January 2007, after a 1.6% reading in October.

With the rapid price declines in recent months, by early 2009, when the consumer-price index will be calculated relative to the peak prices early this year, headline inflation could be negative. That has raised the specter of deflation, or a sustained period of falling prices. Deflation, which can be highly difficult for governments to reverse, would add a further drag to China's economy.

 

 

 

 

 

 

 

 

 

 

 

 

Economists worry about deflation because of its potential for creating a self-reinforcing negative spiral: If consumers expect prices to fall, they will put off purchases, which depresses demand and further lowers prices.