A rebound in the consumer price index (CPI) in August has encouraged economic researchers to confidently predict that the Chinese economy is set to finally shake off a nearly two-year-old price slump this year.
A rise in CPI, a key gauge of inflation, suggests higher prices that consumers have to pay but also means a stronger market demand.
For the Chinese economy which has been combating lingering deflationary pressure, characterized by sluggish consumer demand, the CPI gain is undoubtedly good news.
Liang Hong, an economist with Goldman Sachs (Asia), said the Chinese economy is gradually moving away from persistent deflation, or falling prices.
In its report released recently, Goldman Sachs revised its forecast of inflation from 0.5 per cent to 0.9 per cent for this year.
The CPI is projected to grow by a further 1.5 per cent in 2004, the report said.
