Inflation fall gives China room to expand Chinese inflation slowed in October on the back of weaker food prices, giving the government more space to deploy pro-growth policy measures. Consumer prices rose 1.7 per cent last month from a year earlier, down from September's 1.9 per cent rise and below the forecasts of many analysts. Prices fell 0.1 per cent month on month, according to the national statistics bureau. The low inflation reading is good news for the government on two fronts. For the economy, it suggests that policy makers still have plenty of scope to continue the moderate monetary and fiscal stimulus measures that they have used in recent months to rev up growth. The Chinese economy has slowed for seven straight quarters, ebbing to 7.4 per cent year-on-year growth in the third quarter, but recent indicators point to an upturn in the fourth quarter. Politically, the subdued inflation figure also comes at an opportune time. The Communist party opened a congress in Beijing on Thursday at which it will unveil the country's leaders for the next decade. The rising cost of living has been one of the main complaints of ordinary citizens, but officials can point to receding inflation as evidence of their sound economic management. Zhou Xiaochuan, central bank governor, made that case to reporters at the congress on Thursday, speaking a day before the data were released to the public but after he had already seen the numbers. October data are showing signs of improvement. The domestic economy is evolving in a good direction," he said. Inflation spiked last year in the wake of the government's mammoth stimulus package that powered the economy through the global financial crisis. This year, when growth slowed more sharply than expected, Beijing took a more conservative approach, approving more investment projects but refusing to shower the economy with cash as it did in 2009-10. The central bank has used open market operations as its main tool, injecting liquidity on a weekly basis that can easily be withdrawn if prices start to rise too quickly. For the time being, though, inflation is running at less than half of China's official target of capping price rises at 4 per cent this year. The October CPI [consumer price index] confirms that inflation is currently not a main concern for the government. Policy easing will likely continue in Q4 [the fourth quarter] to support a growth recovery," Zhang Zhiwei, an analyst with Nomura, wrote in a note to clients.