The decreasing PPI and CPI will allow more room for interest rate cuts to boost economic development. Merrill Lynch & Co. said it expects China's central bank to cut the benchmark interest rates by a total of 81 basis points this year.

Foreign trade value--down 29 percent

Facing stiff headwinds in the international market, China's foreign trade value plummeted at a staggering speed in January, dropping 29 percent year on year to $141.8 billion. This marked the third consecutive month of year-on-year drops.

The General Administration of Customs (GAC) trade figures released on February 11 also showed a double-digit drop in both exports and imports. The export volume decreased 17.5 percent to $90.45 billion, while imports fell 43.1 percent to $51.34 billion, pushing the trade surplus up year on year by 102 percent to $39.1 billion, nearly a record high.

Foreign-funded companies remained the biggest source of exports, accounting for more than half of the country's export value, while state-owned businesses made up about one fifth. The EU continued to be China's largest trade partner, followed by the United States and Japan.

The GAC said the sharp decline in January's trade volume was due in part to the week-long Spring Festival holiday (January 25-31), which fell in February last year.

Merrill Lynch suggested ignoring separate January and February trade volumes and looking at the combined value of the two months, because it believes the broader picture would tell a more genuine story.

Although China has long relied on exports to boost its economic growth, the global financial meltdown has taken a toll on the country's exports, prompting a shift to domestic consumption.

The Biggest Auto Market--China

China replaced the United States as the biggest auto market in the world in January.

According to the China Association of Automobile Manufacturers, a total of 735,000 auto vehicles were sold in the country last month. U.S. automakers produced only 657,000 vehicles, as they continued to shut down plants and lay off thousands of workers.

The production of cars with engine displacements of less than 1.6 liters grew the fastest by 18.8 percent. Domestic-brand vehicles enjoyed a larger market share of about 30 percent, giving it the biggest slice of the market.

The boom in car sales was mainly attributed to the government revitalization plans unveiled in mid-January. It cut fuel prices and taxes on the purchase of vehicles with small engine displacements.

Xu Changming, a senior expert at the State Information Center, told the Beijing News that the monthly figure did not indicate that the Chinese market had surpassed that of the United States in real terms.

"Once the U.S. economy is back on the right track, it is likely to resume 16 million auto sales a year," Xu said. "It will take China four to five years to catch up to that speed."

Retail Giant to Close More Outlets

Gome Electrical Appliances Holding Ltd., China's largest home appliance retail group, will close 100 underperforming stores nationwide this year, after closing dozens of stores last year.

He Yangqing, a company spokesman, said in a printed statement that the economic downturn had affected the company's sales revenue. He also said the worst had passed, and Gome was working on improving the performance of its existing stores. The company would also open new outlets and maintain its current number of stores at 1,300, he said.

Gome is a mainland-based company listed on the Hong Kong Stock Exchange. Its shares have been suspended from trading since November 24, last year, after it came to light that the company's former president, Huang Guangyu, had been detained for manipulating the stock prices of several listed companies in the mainland A-share market.