China growth slowest in two years

BEIJING (Reuters) – China’s industrial output growth dropped in November to its slowest pace in more than two years and inflation tumbled as economic conditions deteriorated, raising expectations that Beijing will pursue a more pro-growth policy to support jobs.

Easing inflation pressure on consumers at the same time as data signals a serious risk of a sharp industrial slowdown is potentially perilous for policymakers trying to engineer a soft economic landing against a backdrop of a deepening crisis in China’s main export market — debt-ridden Europe.

“The sharp contraction in the real economy, the external uncertainties lingering on, plus the easing inflationary pressure all point to a larger scope for further policy easing. So the basic tone of the macro policy will lean towards the pro-growth side,” said Nie Wen, analyst at Hwabao Trust in Shanghai.

A deluge of data on Friday showed China’s annual consumer inflation rate tumbled in November to 4.2 percent, the lowest level since September 2010 and slightly below expectations. It was the first time since February it had fallen below 5 percent.

Inflation has dropped from a three-year high of 6.5 percent in July, allowing Beijing to shift its policy stance towards offering support for the economy, especially as CPI is now closer to the full-year government target for 2011 of 4 percent.