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July 5, 2010    

Shanghai composite index closes at 15-month low

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by Kay Murchie
Shanghai composite index closes at 15-month low

The Shanghai composite index has today closed at a 15-month low over concerns about rising inflation and a slowdown in the economy.

The index lost 19 points (0.8%) to close at 2,364, which represented the lowest since April 8, 2009.

The index is now down 32% from its high in August last year.

The Chinese economy, which is the world’s third largest, expanded at an annualised rate of 11.9% in the first three months of the year - the fastest pace in almost three years.

Economists have cautioned that the economy is expanding too quickly but recent data has suggested the economy may be cooling off.

Last week, two official independent surveys revealed a slowdown in manufacturing activity.

Furthermore, passenger car sales slowed last month - an indication that the economy may be easing.

However, Chinese inflation continues to increase on the back of rising house and food prices.

The rate is currently just above the Government’s target of 3% and has raised expectations that that Beijing may increase interest rates.

Many economists believe higher interest rates would help the economy avoid inflationary pressures.

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