UPDATE 2-China sets in motion plan for 2012 succession meeting

* Meeting says growth to remain steady, relatively fast* Cultural reforms stick to promoting “core values”* Meeting calls for “healthy” InternetBy Chris BuckleyBEIJING, Oct 18 (Reuters) - China’s leaders ended their latest closed-door conclave on Tuesday with a decision to hold a Communist Party congress in the second half of 2012 to install successors to President Hu Jintao’s generation.That decision will put onto a more formal footing arrangements for the handover of power in the world’s second biggest economy, with a preparatory group for the congress probably headed by Vice President Xi Jinping, the man virtually assured of succeeding Hu as party and state leader.The five-day meeting of the ruling Communist Party’s Central Committee also approved a decision on “cultural reform” – the government’s push to invigorate state-run publishers, broadcasters and performers – Chinese television reported.But official news reports shed little light on what substance was discussed at the meeting, including possibly preparations for the long-expected succession and prospects for economic growth, which slowed a little in the third quarter, according to statistics released on Tuesday.The meeting of 365 senior officials “stressed we must strengthen our awareness of perils and risks,” said the official summary issued on the government website (www.gov.cn).The government will “maintain steady and relatively fast economic development”, and put more effort into improving public welfare and strengthening social stability, it said.Central committee plenums are annual gatherings to approve broad decisions on the direction of government policy. In China, power resides in the party elite and meetings of the Central Committee also offer chances for provincial chieftains to make known their policies and promotion hopes.The 18th central committee will be chosen at the party congress due to convene in late 2012, succeeding the current, 17th central committee.Potential contenders for top positions who gathered in Beijing included: Bo Xilai, the charismatic boss of Chongqing municipality in the southwest, who has promoted an ambitious programme to narrow economic inequalities; Wang Yang, the boss of export-driven Guangdong province in the south, who has cast himself as a more liberal leader; and Yu Zhengsheng, the boss of Shanghai, the country’s coastal business center.“COMPREHENSIVE COMPETITIVENESS"In economic policy, the Central Committee members may have discussed, but probably did not decide on, any big changes to a fast-growing economy that has suffered from nagging inflation and worries about a global economic downturn, analysts said earlier.But the official public focus was on the cultural reforms, which the meeting said were needed to project Chinese influence and values to a wider world.The government has spent heavily on television, newspaper and Internet projects to promote its views and values. But those initiatives come encumbered with censorship and controls that the latest promised reforms are unlikely to dilute.Officials have been especially jittery about the potential of the Internet, especially fast-expanding microblogs, to strain at censorship and sow unrest.The meeting’s communique said the government wanted all cultural products and forms of communication to embody "the system of socialist core values”, which is the party’s term for orthodox beliefs.The government would promote a “healthy, progressive Internet culture”, said the meeting communique.An Internet regulator last week urged stricter policing of the nation’s microblogs while also indicating that the government wanted to learn to use such Internet platforms to communicate with citizens, rather than shut them down.President Hu and Premier Wen Jiabao step down from their Communist Party posts at the congress in late 2012, but hang on to their state and government jobs until early 2013, when the national parliament will vote in their successors.Wen is likely to be succeeded by Vice Premier Li Kiqiang, a former law student who rose through the Communist Party Youth League, marking him as a protege of President Hu.Hu could also emulate his predecessor, Jiang Zemin, who stayed on as chairman of China’s Central Military Commission for more than a year after giving up the presidency, using his status as military chief as a platform to influence policy.

WRAPUP 2-China inflation ticks lower, policy on pause

* Increases in food prices still a concern* Policy dilemma as global slowdown weighs* China already taken baby steps to support economy* Price official sees inflation pressures easing slightlyBy Aileen Wang and Koh Gui QingBEIJING, Oct 14 (Reuters) - China’s consumer inflation dipped to 6.1 percent in September, retreating further from three-year highs, although stubborn food price pressures will deter the central bank from loosening its policy reins anytime soon.A slowdown in price rises would be welcomed by policymakers as confirmation that a flurry of increases in interest rates and bank reserve requirements is working, just when China’s economy is showing increasing strains from the global downturn.Since inflation is still close to the three-year peak of 6.5 percent hit in July, few analysts believe China will follow the Brazil, Indonesia and Singapore and ease policy in the near-term, unless there is a marked deterioration in Europe’s debt woes.“The slowdown in the CPI last month is not drastic enough to reduce inflationary expectations, and it is still too early to confirm an easing trend in price pressures,” said Qiao Yongyuan, an analyst with CEBM in Shanghai.“The central bank is more likely to keep its current monetary stance unchanged and will wait for data in coming months to judge the direction of policy,” Qiao said.The dip in inflation in September was right in line with a poll of economists’ forecasts and lower than August’s reading of 6.3 percent.Food price pressures remained strong, however, rising 13.4 percent from a year earlier, unchanged from the pace in August’s data. Non-food inflation eased to 2.9 percent from 3.0 percent in August, the data showed.China’s producer price index in September came in below market expectations with a 6.5 percent rise from a year ago, compared with August’s 7.3 percent.“The data will come as a relief to the Chinese government, which now faces a deadlock in policymaking. It will fine-tune policies in December,” said Shen Jianguang, an economist with Mizuho Securities Asia in Hong Kong.China’s ruling Communist Party usually holds an annual agenda-setting economic policy conference in December.Headline inflation may have fallen for two months running, but other evidence shows that the battle is far from won, analysts said. Policymakers, worried about the potential for price rises to fuel social unrest, are sure to remain guarded.“Right now, they are not sure that inflation is slowing just (based on) one month’s number. The policy will be on hold for one or two more months,” said Shen.A central bank survey issued in September showed inflation expectations among urban Chinese rose in the third quarter.Monthly changes in the consumer price index suggested price pressures actually picked up in September, rising by 0.5 percent compared with 0.3 percent in August.The government pays particular attention to prices of pork, the staple meat for many ordinary citizens griping about inflation. Pork prices were 43.5 percent higher in September than a year earlier, barely easing from a 45.5 percent rise in August.After the data were released, a price official told the Xinhua news agency that inflationary pressures had reached a “turning point” and would begin to ebb, but only gradually.“Later, they will plateau and then fall, but the size of the fall will not be large,” said the official, Zhou Wangjun, of the National Development and Reform Commission, which steers economic policy.“Pork prices will steadily fall, but there are many other new factors pushing up prices,” added Zhou, who said those factors included resource and labour costs.POLICY ON HOLDAfter lifting interest rates five times and banks’ reserve requirements nine times since October 2010, Beijing has put policy tightening on hold as a slowdown in Europe and the United States threaten global growth.On Friday, Singapore eased its monetary policy, saying the “outlook for the global economy has deteriorated sharply.” That followed rate cuts in Brazil and Indonesia in recent weeks.China’s economic growth has been slowing down this year alongside increasing concerns that the developed world may be heading into a recession.Data on Thursday showed China’s import and export growth eased in September, as domestic and overseas demand cooled. The annual pace of exports to the troubled European Union in September more than halved from August.The government has already taken some baby steps to support the economy. On Wednesday, it unveiled measures to support cash-starved small businesses, which account for 75 percent of employment.A unit of China’s sovereign wealth fund is buying Chinese bank shares in the midst of concern about how they will be impacted by a mountain of local government debt.Some analysts say China may relax monetary policy if push comes to shove, although milder moves such as relaxing credit restrictions and lowering banks’ reserve requirements are likely to come before a more drastic rate cut.“The central bank may even see fit to ease policy before the end of the year, perhaps starting with cuts to very high reserve requirements, though it will be keen to keep a grip on lending growth,” said George Worthington, the chief Asia Pacific economist for IFR Markets.“Rate cuts are unlikely to be on the agenda barring a renewed global slump given the relatively modest tightening on that front since the last crisis in 2008/09.”