The Chinese consumer price index (CPI) grew by 2.1 per cent in March from a year earlier, down from 3.2 per cent in February as food prices declined due to the country’s Lunar New Year holiday season and drain of funds by the People’s Bank of China.
Food price inflation grew by 2.7 per cent, compared to a growth of 6 per cent in February.
The average increase in consumer prices in the first quarter of 2013 was 2.4 per cent, a marginal increase compared to the final quarter of 2012.
Jian Chang, an economist with Barclays, told the Financial Times: “Overall, the recovery has been moderate which helps to rein in the inflation pressure from the demand side. Recovery means a continued rise, so we have been saying it looks more like a growth stabilisation, a gradual and moderate improvement.”
The world's second-largest economy China rebounded to an annual growth of 7.9 per cent in the fourth quarter of 2012, after slowing at 7.4 per cent in the third quarter of 2012.
The People's Bank of China has drained cash from the economy for seven straight weeks since the Lunar New Year holiday ended in mid-February to counter inflationary pressure. However, withdrawals have been moderate.
Zhou Xiaochuan, governor of the People’s Bank of China, said in March that he was on high alert against prices increases and added that experience had taught him not to delay the fight against inflation.
A record amount of foreign currency entered the Chinese financial system in January 2013 and analysts say the central bank has had to step up its interventions in the foreign exchange market to keep the renminbi from appreciating, reported the Financial Times.