Chinese economy on an upward trend

The fear of deflation had economists worried earlier this year. They were concerned it could influence economic development. One issue the experts took note of was the producer price index, which measures inflation at the wholesale level. It fell for eight straight months this year but in fourth quarter, the downturn stopped and the PPI showed recovery.

China's consumer price index or CPI, slipped 0.5 percent in October compared to the same period last year. The PPI index, however, continued its more aggressive downtrend by falling 5.8 percent. A decline in both indicators implied China was still experiencing excessive production capacity and deflation.

But statistics show the PPI and CPI bottomed out at the end of the third quarter. Though still at a low level, the downward trend slowed and showed signs of recovery. Global commodity prices are also showing signs of bottoming out, a signal of mounting "imported inflation" pressure.

Meanwhile, domestic demand is still in the process of recovery and market liquidity is sufficient.

Experts say the central government's fiscal policy has been effective in stimulating economic development, there increased consumption, more private investment and rising employment.

Economists predict China's economy will grow at a moderately faster pace next year. The growth of domestic consumption, which the government highlighted as a long- term economic solution, is not likely to exceed this year's amount.