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Customers explore a morning market in China, where they carefully select ripe tomatoes from a vibrant stall in Beijing. The market is alive with activity, as locals and visitors alike peruse the various offerings available.
The latest data from the National Bureau of Statistics (NBS) reveals that China’s consumer prices dipped in October, reflecting weakened domestic demand, while factory-gate deflation also deepened. The consumer price index (CPI) fell by 0.2% year-on-year and 0.1% month-on-month, indicating challenges for the country’s economy.
A significant factor in the CPI decline was the sharp drop in pork prices, which fell by 30.1% due to an oversupply of pigs and weakened demand. Additionally, core inflation, which excludes food and fuel prices, also slowed to 0.6% in October, highlighting China’s ongoing struggle with disinflationary pressures.
The producer price index (PPI) showed a 2.6% year-on-year decline, with economists predicting a 2.7% fall. These figures are concerning, particularly given previous reports of a persistent disinflationary trend. Chinese policymakers are faced with the task of implementing effective measures to prevent further downward inflationary pressure.
While China continues to introduce support measures, such as sovereign bond issuance and debt quota frontloading for local governments, challenges remain, including a property crisis, local debt risks, and policy divergence with the West. Recent economic indicators have been mixed, with unexpected growth in imports but a contraction in exports, along with varying activity levels in both manufacturing and services sectors.
Moody’s forecasts that China’s economy will grow by 5.0% in 2023 according to authorities’ targets, followed by 4.0% growth in 2024 and 2025. This outlook, however, is subject to downside risks due to structural factors.
The economic landscape presents challenges for policymakers, with the need for an appropriate policy mix and supportive measures to boost business confidence and stimulate household spending. Acquiring licensing rights to access more in-depth analysis will provide valuable insights into China’s evolving economic situation.
