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Xinyi Wu

Amanda Lee

China’s monetary policy easing did not spike inflation last month, with both consumer and producer price growth falling short of expectations and deflationary pressures continuing to bite.
The consumer price index (CPI), a key gauge of inflation, grew by 0.4 per cent year on year in September, compared to an increase of 0.6 per cent in August, the National Bureau of Statistics (NBS) said on Sunday.
The reading fell short of the expected 0.7 per cent growth projected by economists polled by Wind.
The growth was largely driven by food prices, which grew by 3.3 per cent year on year last month, including a 22.9 per cent jump in vegetable prices and a 16.2 per cent increase in pork prices.
However, home appliance prices dropped by 2 per cent from a year earlier, housing rents were down 0.4 per cent, while the price of vehicles dropped by 5.3 per cent amid large supply.
Prices of Chinese new energy vehicles, which face high tariffs in the United States, the European Union and Canada, dropped by 6.9 per cent year on year.


On Sunday, Dong Lijuan, an official with the statistics bureau, attributed the slower consumer inflation growth to a higher comparison base last year.
Amid an overall economic slowdown, consumers in the world’s second-largest economy are holding back on spending as the labour market remains weak and the property slump drags on.
China’s CPI growth has remained around zero since March of last year, fuelling market concerns about deflationary pressure and weak demand.
Meanwhile, China’s producer price index, which measures the cost of goods at the factory gate, slipped by 2.8 per cent in September, falling for the 24th consecutive month, compared to a decline of 1.8 per cent in August.
The reading was worse than the 2.5 per cent decline forecast in a Wind poll.
Elsewhere, China’s core inflation, which excludes volatile food and energy prices, rose by 0.1 per cent last month compared to a year earlier. The key gauge used by monetary authorities dropped 0.1 per cent from August, while January-September growth was 0.5 per cent.
On a month-on-month basis, China’s CPI remained unchanged in September following a 0.2 per cent fall in August, according to the NBS.


The current CPI reading, with growth of 0.3 per cent for the January-September period, is far below the annual control target of 3 per cent, providing a lot of leeway for China’s monetary easing.
Starting last month, Beijing announced a variety of measures to help meet this year’s gross domestic product growth target of around 5 per cent.
The People’s Bank of China rolled out a larger-than-expected monetary easing at the end of September, including a 20-basis-point cut to the seven-day reverse repo rate, a large cut to mortgage rates and the release of 1 trillion yuan (US$141.5 billion) in liquidity into the interbank market through a reduced reserve requirement ratio.
Zhiwei Zhang, president and chief economist of Pinpoint Asset Management, said a change in fiscal policy stance would help to shore up demand.
“The size of the fiscal stimulus matters. Decisive action is required before the deflationary expectation becomes further entrenched,” he said.
During a press conference on Saturday, the Ministry of Finance vowed to tackle local debt with a larger-than-expected swap plan and to stabilise the property market with more incentives, but did not reveal a specific figure for a fiscal package.
However, the market is expecting a mild fiscal stimulus through the issuance of ultra-long treasury bonds and a higher fiscal deficit ratio next year, pending approval by China’s top legislature.


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China’s consumer price index grows by 0.4 per cent year on year in September, while the producer price index slips by 2.8 per cent


China’s consumer price index grows by 0.4 per cent year on year in September, while the producer price index slips by 2.8 per cent.


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