Analysts believe that, even as other central banks around the world tighten policy, the People’s Bank of China (PBOC) may be able to loosen policy to help the slowing economy.
“Concerns about inflation are unlikely to deter the (People’s Bank of China) from taking additional policy easing measures,” said Sheana Yue, China Economist at Capital Economics.
“Lower inflation signals poor domestic demand,” said Zhiwei Zhang, Pinpoint Asset Management’s Chief Economist. “Macro policies have shifted in favor of the economy, but it will take time for the effects to be felt.”
Due to rising global energy prices, the Chinese economy, notably its massive manufacturing sector, has battled with high production costs.
Coal mining and washing prices increased 51.3 percent year over year in January, while oil and gas extraction prices increased 38.2 percent.
China’s state planner warned earlier this month that global inflation is likely to continue for some time, but that the country’s ability to deal with unusual price variations is strong.
Producer price inflation is expected to fall further this year, while consumer price inflation is expected to go up, according to the National Development and Reform Commission (NDRC).
To slash borrowing costs, the PBOC has cut interest rates and injected cash into the banking system, with more easing measures planned.
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Yue of Capital Economics anticipates more policy rate reduction before the end of the year.
In contrast to Western central banks, which have either begun hiking interest rates or are generally expected to do so this year, China has the ability to soften.
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At the same time, regulators are leery about relaxing credit conditions too quickly, which might re-ignite speculative property price rises.
The property market has slowed as a result of developer borrowing restrictions and apprehensive buyers.
“Policymakers don’t want to erase all the gains they made in the property market last year by cutting interest rates,” said Nie Wen, chief economist at Hwabao Trust.
“Now that they’ve finally managed to rein in rapidly growing (property) prices, any interest rate decreases will be structural, aimed at boosting the actual economy rather than further fuelling the property market.”
Is the inflation rate in China high?
China’s inflation rate from 2011 through 2026. According to preliminary data released by China’s National Bureau of Statistics in January 2022, the country’s average annual inflation rate in 2021 was roughly 0.9 percent, up from the previous year.
Why are Chinese prices rising?
BEIJING (Xinhua) Food and other commodity prices are rapidly rising in China, putting pressure on officials entrusted with maintaining growth stability.
What is China’s strategy for combating inflation?
Currency Printing China, on the other hand, has tight state-dominated controls over its economy, allowing it to handle inflation differently than other countries. To keep inflation under control in China, modifications are made to subsidies and other price control measures.
Is China’s Economy Seizing Up?
Because there are clear signs that the Chinese economy is overheating, which is causing widespread concern, this latest study is critical in allowing manufacturing companies, as well as foreign investors, to gain a better understanding of the problem and formulate a more appropriate manufacturing strategy.
Is China a source of inflation?
China’s manufacturers have functioned as a brake on global inflation for years, cutting costs to retain international customers in the face of weak demand and competition from up-and-coming industrial rivals such as Vietnam.
How much does China’s inflation cost?
According to Trading Economics global macro models and analysts, China’s inflation rate is predicted to be 1.20 percent by the conclusion of this quarter. According to our econometric models, the China Inflation Rate is expected to trend around 2.00 percent in 2023.
What factors contribute to high inflation rates?
- Inflation is the rate at which the price of goods and services in a given economy rises.
- Inflation occurs when prices rise as manufacturing expenses, such as raw materials and wages, rise.
- Inflation can result from an increase in demand for products and services, as people are ready to pay more for them.
- Some businesses benefit from inflation if they are able to charge higher prices for their products as a result of increased demand.