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Andrew Mullen

1. Consumer inflation remains soft
China’s consumer price index (CPI), a key gauge of inflation, rose by 0.3 per cent year on year last month, slowing from an increase of 0.4 per cent in September.
The reading fell short of the 0.42 per cent growth projected by economists polled by Chinese financial data provider Wind and was the slowest growth in four months.
“The dip in the CPI inflation reading was mostly a result of food and energy price inflation,” said analysts at Nomura.
“In sequential terms, core and service CPI inflation both edged up to zero per cent month on month in October, but both were weaker than traditional seasonality suggests, which indicates domestic consumer demand remained soft.”


Food inflation fell back slightly from 3.3 per cent to 2.9 per cent as the adverse weather shock that boosted vegetable prices subsided, while energy prices also continued to fall, registering their biggest year-on-year decrease in 15 months, according to Gabriel Ng, assistant economist at Capital Economics.
Analysts at Goldman Sachs said the weakness mainly derived from non-food goods, particularly transport equipment and home appliances.
China’s CPI growth has hovered around zero since March last year, raising market concerns about deflationary pressure and sluggish demand.
2. Factory-gate prices slip further
China’s producer price index (PPI) – which measures the cost of goods at the factory gate – slipped by 2.9 per cent in October, falling for the 25th consecutive month after a decline of 2.8 per cent in September.
The reading was worse than the 2.5 per cent decline forecast by Wind.
“Sequential PPI inflation recorded a surprisingly negative reading, despite a broad-based increase in raw materials prices in October,” said analysts at Nomura.
In month-on-month terms, the fall in factory-gate prices eased significantly from 0.6 per cent to 0.1 per cent. But consumer durables prices fell 1.1 per cent month on month, representing the largest fall since at least 2011 and suggesting overcapacity remains a problem, added Ng at Capital Economics.


3. Core inflation rises
China’s core inflation, which excludes volatile food and energy prices, rose by 0.2 per cent last month compared to a year earlier and up from 0.1 per cent in September.
Ng at Capital Economics said there are some signs China’s stimulus measures have boosted domestic demand, as services inflation rose from 0.2 per cent year on year to 0.4 per cent, stemming a string of decline.
But core goods prices have stagnated, he added, signalling that supply side expansion was still outpacing demand.
4. Consumption stimulus needed to boost domestic demand
Analysts at Nomura expect CPI inflation of 0.3 per cent and 0.8 per cent in 2024 and 2025, respectively, down from 0.4 per cent and 1 per cent.
“Deflationary pressure is clearly persistent in China,” said Zhang Zhiwei, president and chief economist at Pinpoint Asset Management.
On Friday, China’s top legislative body, the National People’s Congress (NPC) Standing Committee, concluded a week-long session by unveiling an additional 6 trillion yuan (US$837 billion) bond quota to resolve the so-called hidden debt of local governments while pledging more “forceful” fiscal support measures to underpin China’s economic growth.
Stimulus targeting the consumption side would be more effective to boost domestic demand, and avoid exacerbating the overcapacity problem
Zhang Zhiwei, Pinpoint Asset Management
“All told, stimulus does appear to be putting a floor under inflation, at least for now,” said Ng at Capital Economics.
“The near-term fiscal boost from local governments deploying existing funds should nudge up inflation further in the near-term.
“But unless this is followed up by a major fiscal expansion next year, the economy still faces the risk of slipping into a deflationary trap.”
Zhang at Pinpoint Asset Management said the NPC decision on the debt swap was one step to address the macro challenge, but bolder actions are likely next year if trade war with the United States intensifies in Donald Trump’s second presidential term.
“Stimulus targeting the consumption side would be more effective to boost domestic demand, and avoid exacerbating the overcapacity problem,” he added.


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A customer shops for cabbages at the vegetable section of a supermarket in Beijing. Photo: Reuters

An employee works on the production line of a robot vacuum cleaner factory in Shenzhen. Photo: Reuters

People buy fruit at a supermarket in Kaifeng, central China’s Henan province. Photo: Xinhua

Consumers in China, the world’s second-largest economy, have been curbing spending amid a weak labour market and ongoing challenges in the property sector. Photo: Reuters

China unveils debt-relief plan, keeps further stimulus salvo in reserve arsenal

A week-long NPC Standing Committee meeting ended on Friday with mostly forward-looking plans to right China’s economic ship. Photo: AFP

Chinese Minister of Finance Lan Foan (centre) speaks at a press conference in Beijing on Friday. Photo: AFP

China’s stimulus strategy, while not ‘whatever it takes’, is seen as long and intact

 Illustration: Brian Wang

Forum hears economists’ prescriptions for curing China’s property woes

Buildings under construction in Beijing. Photo: EPA-EFE

Newly-built flats in Beijing last month. Photo: AFP

Birthplace of Confucius given key role in Beijing’s soft power push

A 72-metre (236 feet) bronze Confucius statue at the Nishan Sacred Land on Nishan Mountain. Photo: Simon Song

A worker inspects the bottles of Tsingtao beer rolling out from one of the four breweries in the eastern Chinese port city of Qingdao. Photo: AFP

Rising more than 1,550 metres  (4,921 feet), Mount Tai in China’s northern Shandong province is one of the Five Sacred Mountains in ancient China. Photo: Frank Chen

A ‘drunken room’ in the Tsingtao Brewery in Qingdao, Shandong province, gives even non-drinkers the chance to experience the effects of inebriation.

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Consumer price growth in China slowed in October, while the cost of goods at the factory gate fell for the 25th month in a row


Consumer price growth in China slowed in October, while the cost of goods at the factory gate fell for the 25th month in a row.


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Explainer | ‘Deflationary pressure remains’ for China: 4 takeaways from October’s inflation data

Consumer price growth in China slowed in October, while the cost of goods at the factory gate fell for the 25th month in a row

1. Consumer inflation remains soft