TOPWRAP 5-US prices drop at record pace, China wary of unrest

[bijou]

LONDON, Nov 19 (Reuters) - China has told police to ensure social stability as its economy slows, U.S. inflation tumbled at a record pace and markets fretted on Wednesday about whether America's stricken car industry would be rescued.

The 1.0 percent monthly fall in U.S. consumer prices reflected a sharply weakening economy and raised the prospect of deflation if consumer demands fails to pick up. Construction starts on new U.S. homes also hit a record low in October.

"It's a reflection of very weak demand," said Carl Lantz, interest rate strategist at Credit Suisse in New York. "The fourth quarter is probably going to be the most intense period of economic weakness."

European Central Bank President Jean-Claude Trichet said the financial crisis -- sparked by a U.S. housing crash and huge bank losses that followed -- marked the first time since World War Two that the finances of the industrial world have been at stake.

He said it could be solved by central banks and governments in concert, with a key role for the private sector, but told Sky Television late on Tuesday: "It will take time."

The Bank of England seemed to share his view.

Minutes of its last meeting, when it cut interest rates by a shock 1.5 percentage points, showed it considered an even bigger reduction to tackle a recession that has now been confirmed.

Rioting involving thousands of people exploded on Monday in China's Gansu province, the latest bout of popular unrest.

The China Daily quoted Public Security Minister Meng Jianzhu as saying police "should be fully aware of the challenge brought by the global financial crisis and try their best to maintain social stability".

Although the Gansu violence was triggered by a plan to resettle residents in an earthquake-torn region, it follows strikes by taxi drivers and labour protests in regions long-reliant on Western demand for Chinese exports.

IMA Asia, a business intelligence provider, said it had raised its political risk rating for China from low to medium.  ...

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[JohnnyReb]

Looks like the socialist of China have gotten a taste of the good life, "capitalism".