BEIJING - China's consumer inflation came in at a five-year low last year, with the economy sending mixed signals: a speculator-led stock rally on the one hand and a looming credit crunch on the other.
The Consumer Price Index gained 1.5 per cent in December, bringing the rate for full-year 2014 to 2 per cent, the lowest since 2009, when the growth stood at minus 0.7 per cent amid the global financial crisis. Prices grew at a 2.6 per cent clip in 2013.
Intercompany transactions appear to be in a state of deflation. The wholesale price index fell 3.3 per cent on the year in December, extending a streak of negative year-on-year growth to nearly three years. Last year marked the persistent buildup of deflationary pressures, with every month showing a decline from year-earlier levels.
The nation's slowing economy has taken a toll on businesses. Kaisa Group, a Shenzhen-based real estate developer that grew rapidly on the back of a development boom, defaulted on a bank loan in late December, as the housing market ran out of steam. Pressed for money, the troubled developer may also be at risk of additional default on other debts and bonds.
Weeding out poorly managed companies is a necessary evil for China to make a transition to a more efficient industrial structure, but setting a chain of bankruptcies in motion would run the risk of stalling out the economy.
Read the full article here.