China's consumer price index (CPI) growth continued to fall in January, as inflationary pressures eased in the country.

The index, the major indicator of inflation, rose 1.9 per cent last month on a year-on-year basis, compared with last December's 2.4 per cent growth, according to a release by the National Bureau of Statistics (NBS) yesterday.

The CPI has been falling for five consecutive months since last September, when annualized CPI growth eased from 5.3 per cent in August to 5.2 per cent.

Analysts said the trend should be basically maintained in the coming months and the inflation rate should continue to fall.

"January CPI growth was slightly lower than expected," said Zhu Jianfang, a macro-economy analyst at China Securities Co. The growth of food prices, a major component of China's CPI, has been moderating, he said.

There are also seasonal factors. Last January was the holiday season for the Spring Festival, the Chinese lunar new year, which is normally accompanied by an additional price rally. While this year's Spring Festival took place in February.

NBS statistics indicated that food prices rose 4 per cent year-on-year in January. Vegetable prices were down 10.2 per cent.

The prices of services and products in the transportation and telecommunication category also dropped by 2.6 per cent last month. But the prices of fuel, water and electricity rose 10 per cent.

Zhu predicted a mild rebound in February's CPI growth because of higher prices around the Spring Festival holiday, but China should see moderating inflation when the seasonal factors are taken into account.

As price and investment growth slows down in the country, the growth model of the Chinese economy should then be more rational, he said.

China Securities estimates that CPI growth in 2005 will be around 3.2 per cent. That is lower than the 4 per cent estimate made by the National Development and Reform Commission, much closer to the figure of 3.9 per cent in 2004.

The commission's price monitoring centre said last month that the higher costs of production materials will continue to support price growth in 2005. And prices in the service sector will also grow significantly.

But global investment bank Goldman Sachs gave a much lower prediction of the inflation data, with a 2.6 per cent CPI growth forecast for 2005.

Liang Hong, a China Economist of Goldman Sachs, said yesterday that inflation should continue to ease in China in the coming months, as the monetary tightening measures adopted in 2004 take further effect and supply increases in areas where previous capacity constraints led to acute price pressures.

That created a favourable environment for policy-makers to adjust the economy, Liang said.

Economists are generally optimistic regarding the cooling-down of the Chinese economy in 2005 after years of rapid expansion.

Last year, China's gross domestic product rose 9.5 per cent year-on-year. It is generally predicted that the figure should ease down to between 8 per cent and 8.5 per cent this year as the macro-economic controls take effect.

Apart from prices, fixed asset investment is also expected to cool down. It grew 25.8 per cent year-on-year in 2004. The growth rate was done 1.9 percentage points from 2003.