China's consumer price index (CPI), the main gauge of inflation, is estimated to settle at around 6.4 percent in July, according to a Bank of Communications report.

The figure drops 0.7 percentage point from June's 7.1 percent.

Sun Mingchuan, a Lehman Brothers economist, said he expected the CPI to drop to about 6.7 percent in July, according to a Shanghai Daily report.

Sun attributed the drop in inflation to a stabilized supply of food after the government rolled out subsidies for farmers and imposed some limits on food exports.

Last month, the price of agricultural products rose slightly while the cost of meat dropped, according to the National Development and Reform Commission.

Also, the wholesale price index of national agricultural products in July increased fractionally to 162.7, only 1.1 percentage points higher than that in June, according to figures released by the Ministry of Agriculture.

Although the slower CPI rise last month was at least partially due to easing food prices, the country's adjustments on oil and electricity prices may add some inflationary pressure.

China's top economic planner announced in June the raising of prices of gasoline, diesel oil, aviation kerosene and electricity. The report says it may promote price hikes of non-food products.

(CRIENGLISH.com August 4, 2008)