“Central government investment spending fell late last year and early this year as the economic stimulus put in place in 2009 wound down.  Cities across China borrowed and spent huge sums over the last several years and now find themselves financially stretched. To make matters worse for them, the real estate slowdown has hurt their crucial revenues from sales of government-owned land, as falling prices have made developers reluctant to buy more land and build more buildings. Yet for consumers, inflation actually picked up slightly in August, creeping up to 2 percent, from 1.8 percent in July, as food prices kept rising.”

http://www.nytimes.com/2012/09/10/business/global/10iht-yuan10.html?_r=1&pagewanted=all

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