• Mainland China's consumer price inflation fell further to 6.3% in July and 7.7% for the first seven months on falling food prices. Pork prices, which rose 68.3% in April 2008, grew only 12.1% in July, indicating that food price inflation may have peaked finally.
  
  
• But consumer price inflation could rebound easily if oil prices rise again, forcing the government to raise gasoline and diesel prices. Producer price inflation, which touched a 12-year high of 10.0% in July, might also gradually filter through to the consumer level.
  
  
• Inflation apart, the Mainland faces the problem of weakening demand. Most of the indicators, including the growth of industrial output and fixed asset investment, were trending downward. Only consumer spending showed concrete strength. But even this could suffer in the face of slowing economic growth and tumbling share prices.
  
  
• To ensure a soft landing for the Mainland economy, the government has raised export tax rebate rates for some exports recently, relaxed banks' credit quotas, and slowed the pace of hiking banks' required reserve ratios. Further stimulus measures from the government can be expected if economic growth slows too rapidly.

One of the most positive developments in July was the further fall of mainland China's consumer price inflation to 6.3% from 7.1% in June, the lowest since February when it reached 8.7%. The remarkable fall in inflation was due mainly to the continued easing of food price inflation to 14.4% in July from 17.7% in June. The growth of pork price, one of the main factors behind soaring food prices, more than halved to 12.1% in July from 30.4% in June, reinforcing the view that food price inflation may have peaked finally. Back in April this year, pork prices still rose 68.3%.

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