Subdued growth in China’s CPI but easing of policies doubtful
Print Edition
CHINA’S inflation growth remained subdued in October, giving rise to possible easing of policies, but analysts questioned if the government would aggressively relax them.
The Consumer Price Index, the main gauge of inflation, grew 1.6 percent from a year earlier in October, flat from the five-year low in September and indicating subdued inflationary pressure, according to data from the National Bureau of Statistics yesterday.
The Producer Price Index, the factory-gate measurement of inflation, fell 2.2 percent last month, compared with the decline of 1.8 percent in September.
Zhou Hao, an economist at Australia & New Zealand Banking Group Ltd, said China faces rising deflation risk as the PPI has remained negative for 32 consecutive months and the CPI dropped to the lowest level since the global financial crisis.
Zhou said the government’s monetary policy stance will remain accommodative and the fiscal policy will be proactive over the foreseeable future.
But he cautioned the government may not unveil more aggressive easing policies.
The government has refrained from acting forcefully such as by cutting interest rates and lowering reserve requirement ratio — the amount of money that banks must set aside as reserves.
Last week, the government unveiled details covering imports of high-tech equipment, resource products and consumer goods. Also, the People’s Bank of China pledged to continue policies to help the economy weather increasing headwinds in the near term, but stressed it would not flood the markets with cash.
Chang Jian, an economist at Barclays, said the data confirmed the sluggish domestic demand and rising disinflationary risks.
The situation “provides room for more monetary easing,” Chang said. “But broad-based policy changes will more likely be triggered by disappointing growth numbers.”
Chang said Barclays maintained the call for two cuts in interest rates, one in the fourth quarter and one in the first quarter of next year, despite the central bank’s reiteration of tolerance toward slower growth.
China’s economy grew at the slowest pace of 7.3 percent in over five years in the third quarter, led by correction in the property sector. In the first three quarters, the economy grew 7.4 percent, in line with the government target of around 7.5 percent.
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