China's main inflation measures remained in negative territory in April, new data issued Monday show, but economists said the risk of sustained deflation in the world's third-largest economy is subsiding as bank lending surges and other economic indicators start to show improvement.
But much of the current drop reflects a comparison with a huge price spike in the first half of 2008: inflation in April last year was 8.5%. Prices of raw materials have actually been picking up in recent weeks, though they remain below last year's highs.
That reflects increasing indications that China's economy is bottoming out: Growth in fixed-asset investment and industrial output accelerated significantly in March. Chinese banks are also pumping enormous amounts of liquidity into the economy, extending 4.58 trillion yuan (around $671 billion) of new yuan loans in the first three months of 2009, nearly as much as in all of last year.