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Shanghai CPI nearly 2% lower than a year ago

SHANGHAI'S Consumer Price Index in July was 1.9 percent lower than a year earlier, down further from the decrease of 1.5 percent in June and keeping the threat of inflation at bay.

Meanwhile, fixed-asset investment in the first seven months increased 14.4 percent on an annual basis, up from the growth of 9.6 percent in the first half, the Shanghai Statistics Bureau said today.

The city's overall economic conditions have been improving thanks to the government efforts on boosting local demand, but falling exports will make it difficult for Shanghai to hit its 9-percent target for growth this year, analysts said.

"Shanghai's CPI has extended its decreases in July, which defied the concerns of inflation, which could be a result of the loose monetary policy. Investment is expanding even faster, as the infrastructure construction quickens due to the demand of 2010 World Expo in Shanghai," said Liu Hui, a bureau analyst.

The monthly year-on-year comparisons of Shanghai's CPI, the main gauge of inflation, have been negative for six months in a row, and the CPI for the January-July period is 0.7 percent lower than a year ago.

Food prices in July were 1.3 percent lower than a year ago while apparel was 2 percent cheaper. The costs of communications were 2.5 percent les than a year ago.

Li Maoyu, an analyst at Changjiang Securities Co, said the city's deflation was under control as the price drops were mainly mild and stable.

"People are still willing to spend even though prices are dropping -- because inflation is expected in the last quarter of this year. Meanwhile, investment keeps growing strongly, which partly offsets the loss brought by falling exports," Li said.

Shanghai's retail sales last month were 14.3 percent higher than a year ago at 43.1 billion yuan (US$6.3 billion), compared with 14.1 percent higher in June.

The city's exports, the hardest hit sector by the global economic downturn, were 24.1 percent lower last month than a year ago at US$12.2 billion, while they were 14.8 percent down in June.

The still weak global economic conditions were also reflected in the nose-diving foreign direct investment in the city, which was down 34.4 percent in July from a year earlier at US$1 billion.

In a news conference last month, bureau chief economist Cai Xuchu admitted the difficulties ahead for Shanghai to achieve the goal of a 9-percent growth for this year.

"It depends on whether we can sustain the local demand while the recovery of external sales is also important," Cai said.

Shanghai's gross domestic product gained 5.6 percent in the first half, improving from the growth of 3.1 percent in the first three months, the slowest since at least 1992.


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