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BEIJING, Dec. 9 (Xinhua) -- China's November inflation eased to levels near the government's full-year target for the first time in 2011, leaving the world's No. 2 economy in discussions on whether further policy loosening is necessary to spur economic growth.

The consumer price index (CPI), a main gauge of inflation, rose 4.2 percent year-on-year in November, further weakening from 5.5 percent in October due to falling food prices, the National Bureau of Statistics (NBS) said on Friday.

November's inflation rate marked a 13-month low, according to NBS data.

On a month-on-month basis, the cost of living dipped 0.2 percent in November, the NBS said in a statement at its website.

"November's reading indicates that inflation is weakening faster than I had anticipated," said Zhang Monan, a deputy researcher with the Economic Projection Department of the State Information Center.

Before the NBS announcement, Zhang said she expected the November inflation rate to reach just below 5 percent, while many economists projected the CPI growth to fall between 4.2 percent to 4.4 percent year-on-year.

Zhang said the lower-than-expected inflation reading was a result of the country's macroeconomic control policies, particularly the monetary tightening policies put into place in the first half of the year.

"The monetary tightening in the first half of this year had an effect [on the CPI figure]," she said, adding that a contraction in domestic and overseas demand, as well as falling commodity prices in the global market, also curbed price increases in November.

Food prices, which account for nearly one-third of the basket of goods used to calculate the CPI, went up 8.8 percent in November from a year earlier, driving up inflation by 2.7 percentage points, according to the NBS.

The carryover factor, which measures the impact of last year's prices on year-on-year changes in this year's prices, moderated in November and contributed only half a percentage point to November's CPI growth, according to NBS data.

Taking the first 11 months together, the CPI rose 5.5 percent year-on-year in January-November, well above the government's full-year inflation control target of 4 percent. The CPI hit a 37-month high of 6.5 percent in July this year.

The Producer Price Index (PPI), a major measure of inflation at the wholesale level, rose 2.7 percent in November year-on-year to mark the slowest growth since 2010, indicating subsiding inflationary pressure for December this year.

Lu Zhiming, a financial researcher with the Bank of Communications, said he expects the CPI growth will drop below 4 percent in December to cap the full-year inflation rate at around 5.4 percent.

"Inflation won't be a major concern for the economy next year," Lu said, predicting the CPI will rise 3 percent to 3.5 percent in 2012.

TO LOOSEN POLICY OR NOT

The weakening CPI reading provided a catalyst for fresh debate among Chinese economists and analysts on whether China should seize the chance to further loosen its measures that were designated to curb inflation and rein in the property market.

"An easing inflation will give policymakers more room to loosen the policies," said Peng Wensheng, chief economist of the China International Capital Corporation, the country's largest investment bank.

As the economy is slowing, Peng said, the government has already shifted its priority from inflation control to sustaining economic growth.

Peng said the central bank's reduction of banks' reserve requirement ratio (RRR) by half a percentage point last month had sent a signal of adjustment in its monetary policy.

The People's Bank of China (PBOC), the central bank, lowered RRR by 50 basis points for the first time in three years to 21 percent for large commercial banks and 17.5 percent for mid- and small-sized lenders.

Zhao Qingming, a senior researcher with the China Construction Bank, the country's second-largest bank, urged the PBOC to follow foreign central banks to slash the benchmark interest rate, which stands at 3.5 percent for one-year deposits after three rate hikes this year.

What unnerved analysts was a series of indicators showing slower growth in the world's second-largest economy in the second half of this year, including a contraction in the manufacturing sector in November.

The Purchasing Managers' Index, a main gauge of manufacturing activities, fell to 49 percent in November -- the first time since February 2009 that the reading has fallen below 50 percent, the level that suggests contraction.

Moreover, the gross domestic product expanded 9.1 percent year-on-year in the third quarter of the year, down from 9.5 percent in the second quarter and 9.7 percent in the first quarter, marking the slowest pace since the third quarter of 2009.

Zhang Liqun, a macroeconomic researcher with the Development Research Center of the State Council, or China's cabinet, said the adjustment brought by the exit of the stimulus policies was close to an end.

"The economy now is mainly driven by market forces, but the growth foundation is a little fragile and unstable," Zhang said. "Hence, a slower economic growth is inevitable."

However, Han Zhiguo, an economist with a Beijing-based research institute, urged caution, saying a hasty policy loosening inspired by just one month's CPI data will lead to a rapid increase in prices and jeopardize the country's macro-control efforts.

"It is too early to say that the inflation situation is now at a turning point," Han said, "because this round of price increases is generated by rising costs that will continue in the short term.

"Only when the world sinks into a massive financial crisis again should we consider changing our monetary policy."