Let Beijing open the monetary spigot as Chinese inflation plunges (FXI, CNY)

Price pressure in China declined sharply in November as a reflection of a slowing economy and less aggressive competition for labor, energy and other limited resources. This gives Beijing plenty of room to loosen monetary policy to keep its factories running.

According to the official National Bureau of Statistics, consumer prices climbed at an annualized rate of just 4.4% last month, declining sharply from a 5.5% inflation rate in October.

Even more promising, the producer price index — measuring wholesale inflation farther back in the economic pipeline — came in at a mere 2.7%.

That indicates that the consumer number is not an aberration or seasonal data glitch but an apparent trend in the making.

Less pressure on Chinese manufacturers means a lot less pressure on Chinese consumers down the road, which is exactly the scenario Beijing was trying to foster over the last year of tightening its lending requirements, not to mention outright interest rate hikes.

Analysts expected all these statistics to demonstrate much more robust inflation. This is great news for anyone hoping that China would have room to engage in a little stimulation of its own.

Look for the yuan (CNY, quote) to loosen here — possibly as a direct policy move from Beijing. They can afford a weaker currency now.

And a weaker yuan can do its share keeping the global credit markets flowing if, for example, the euro takes a turn for the worse.

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