The consumer price index, China's benchmark of inflation, fell by 1.3 per cent yearon- year in April, the sharpest monthly fall in more than two years. This followed a decline of 0.8 per cent in March. Prices of consumer goods fell by 2.1 per cent, while those of services rose by 1.7 per cent. The index fell by 1.7 per cent in cities, but only by 0.5 per cent in rural areas.
Analysts said that the drop was caused by pressure from cheaper imports as China cut tariffs to fulfil its World Trade Organisation commitments and by lagging demand as consumers showed reluctance to spend due to fears of redundancy. Having cut interest rates in February to try to spur economic growth, the central bank is thought likely to cut them again if prices continue to fall.