SOARING PRICES: Pictured is a vegetable market in Hainan Province, where the consumer price index grew 6.4 percent in August, the highest nationwide (HOU JIANSEN)

Numbers of the Week

754.64 billion yuan

China's fiscal revenues totalled 754.64 billion yuan ($117.9 billion) in August, up 34.3 percent from a year ago, said the Ministry of Finance.

615

China had established 615 rural financial institutions across the country by the end of June, in an effort to improve rural financial services, said the China Banking Regulatory Commission.

TO THE POINT: Inflation is showing signs of moderating, with the CPI growth slowing down. Exports continue their steady recovery while imports skyrocket. Yuan-denominated new loans are rebounding, but it is still too early to tell if policymakers are easing their monetary stance. Meanwhile, consumption picks up steam as reflected by robust growth in retail sales. Investments remain buoyant, injecting momentum into the broader economy. The auto market also stages a mild comeback.

August Figures

CPI and PPI

The consumer price index (CPI), a barometer of inflation, grew 6.2 percent in August from a year ago, 0.3 percentage points down from July, said the National Bureau of Statistics (NBS). The figure was still well above the government-set target of 4 percent for the year.

The biggest driver of the CPI was still food prices, up 13.4 percent in August over the same month last year. Pork prices, in particular, skyrocketed 45.5 percent. Residential costs climbed 5.5 percent, down 0.4 percentage points from July.

The producer price index (PPI), an effective gauge of inflation at the wholesale level, rose 7.3 percent year on year in August, compared with 7.5 percent in the previous month, said the NBS.

Zuo Xiaolei, chief economist with the Beijing-based China Galaxy Securities Co. Ltd., struck a note of caution. "Despite a modest drop in August, China consumer inflation is likely to rebound in the remainder of the year as growing PPI translates into CPI," she said.

"The government is less likely to further tighten the monetary stance given financial difficulties of smaller businesses," said Zuo.

The People's Bank of China, the central bank, raised interest rates three times and the reserve requirement ratio six times this year.

"But it's too early to call for monetary easing because the government learnt big lessons from the extremely loose monetary policies it implemented in 2009 and 2010," said Lu Ting, a Hong Kong-based economist with the Bank of America Merrill Lynch.

Foreign trade

China's foreign trade is recouping some strength, though exporters still face a bumpy road.

In the first eight months, foreign trade totaled $2.35 trillion, soaring 25.4 percent from the previous year, according to data from the General Administration of Customs. Of this total, exports edged up 23.6 percent to reach $1.22 trillion while imports went up 27.5 percent to $1.13 trillion. The trade surplus shrank 10 percent to $92.73 billion.

In August alone, exports rose 24.5 percent to $173.31 billion while imports hit a record high of $155.56 billion, up 30.2 percent.

Despite a modest rebound in exports, economists are concerned about future prospects given the weakness of Western economies.

"The European debt crisis and slowing U.S. growth will be reflected in China's export data in the next few months. I expect Chinese export growth to be below 10 percent in the fourth quarter," said Shen Jianguang, an economist with Mizuho Securities Asia in Hong Kong.

"Strong import growth is driven by China's strong demand for consumer goods, luxury items, iron ore, crude oil, soy as well as corn," he said.

But Cui Li, China economist with the Royal Bank of Scotland, downplayed the worries. "China's exports competitiveness remained undiminished despite fast-rising labor costs, because products are improving and production efficiency is also strengthening," he said.

Song Hong, a researcher with the Chinese Academy of Social Sciences, said the export growth is bound to slow down. "But a sharp slump is less likely unless the developed economies experience a second round of recession," he said.

Bank lending

New loans denominated in the yuan totaled 548.5 billion yuan ($85.7 billion) in August, representing an increase of 9.3 billion yuan ($1.45 billion) from a year ago, said the People's Bank of China, the central bank.

The broad money supply (M2), which covers cash in circulation and all deposits, increased 13.5 percent year on year to 78.07 trillion yuan ($12.2 trillion) at the end of August. The growth rate was down from July's 14.7-percent increase and well below the government's target of 16 percent for the entire year.

"Lending growth recovered in August as the central bank tried to ease the financing woes of small and medium-sized enter prises," said Zhao Qingming, a researcher with China Construction Bank, the country's second largest lender.

"Meanwhile, massive construction of affordable homes also created enormous demands for credit," he said.

"August lending was stronger than expected, but it remains to be seen whether it represents a change in the monetary policies," said E Yongjian, an economist with the Bank of Communications.

"As inflation remains stubborn and clouds gather over the external economic environment, the central bank is expected to maintain its current monetary stance until the broader picture becomes clearer," he said.

Retail sales

Retail sales of consumer goods totaled 1.47 trillion yuan ($229.8 billion) in August, an increase of 17 percent from a year earlier. The August figure brought the amount in the first eight months to 11.49 trillion yuan ($1.8 trillion), up 16.9 percent.

Investments

Investments in fixed assets climbed 25 percent to 18.06 trillion yuan ($2.8 trillion) for the January-to-August period.

The investments in property development were 3.78 trillion yuan ($590.6 billion), representing a growth of 33.2 percent from the previous year.

Industrial output

The added value of industrial enterprises above a designated size—annual sales revenue of 20 million yuan ($3 million) grew 13.5 percent in August, 0.5 percentage points slower than in July. The growth rate for the first eight months was 14.2 percent.

All 39 sectors reported growth in industrial added value in July. The best performers were non-metal minerals, and telecommunication equipment and electronics manufacturing, which increased 17.6 percent and 16.9 percent, respectively.

Auto Recovery

China's gloomy auto market showed signs of recovery, though uncertainties still loom large.

Auto sales across the nation totaled 1.38 million units in August, up 4.15 percent from a year ago, said the China Association of Automobile Manufacturers (CAAM). Output in August stood at 1.39 million tons, representing growth of 8.72 percent year on year.

The August figure brought the amount for the first eight months of this year to 11.98 million units, a modest increase of 3.33 percent from a year ago. The output from January to August amounted to 11.86 million units, climbing 3.04 percent from the previous year, said the CAAM.

The once-sizzling auto market tapered off significantly after the government scaled back favorable purchase tax rates for smaller cars and put new limits on car purchases in Beijing.

Dong Yang, Secretary General of the CAAM, said the market performance will further improve in the rest of the year, which is the traditional peak sales season.

He expects auto sales in the country to grow by 3-5 percent from a year earlier to exceed 18.6 million units for the entire year.

Private Jet Summit

The first China Private Jet Industry Development Summit was held on September 10 in Beijing. A number of government officials, researchers and industry insiders attended the summit and discussed opportunities and challenges facing the emerging industry.

"There are currently only around 100 privately owned jets in China, but the number is about to surge because of a significant wealth boom of successful entrepreneurs," said Sun Xiaohua, Vice Chairman of the All-China Federation of Industry and Commerce.

"Stimulating the fledgling industry still requires stiff efforts to improve airport infrastructure, technologies and talent trainings," he said.

"We will also spare no effort to tap into the private jet market of China, and hope to cooperate with Chinese companies to propel the infant industry," said Jean-Michel Jacob, Vice President of International Sales at Dassault Aviation, a French airplane manufacturer.