CPI eases to 3-month low

An­a­lysts say con­tin­u­ing fall in pro­ducer prices is ‘more of a con­cern’

China Daily (Hong Kong) - - BUSINESS - By CHEN JIA in Bei­jing and YU RAN in Shang­hai

China’s Novem­ber Con­sumer Price In­dex eased to a three-month low of 3 per­cent year-on-year from 3.2 per­cent in Oc­to­ber, amid rel­a­tively weak de­mand con­di­tions, the Na­tional Bureau of Sta­tis­tics said on Mon­day.

An­a­lysts said that the con­tin­u­ing de­fla­tion of fac­tory prod­uct prices should raise more con­cerns than the re­ced­ing con­sumer in­fla­tion.

The Pro­ducer Price In­dex con­tracted 1.4 per­cent in Novem­ber from a de­crease of 1.5 per­cent in Oc­to­ber. The in­dex has re­mained in neg­a­tive ter­ri­tory for 21 con­sec­u­tive months, ac­cord­ing to the NBS.

The long- term PPI de­fla­tion in­di­cates se­ri­ous prob­lems of in­dus­trial over­ca­pac­ity and weak mar­ket de­mand, which may deeply in­flu­ence the de­vel­op­ment of the real econ­omy, said Lu Fengy­ong, a re­searcher at the Na­tional Academy of Eco­nomic Strat­egy at the Chi­nese Academy of So­cial Sciences, a gov­ern­ment think tank.

Qian Shao­tian, a sales man­ager of Shang­hai Yuan­zong Hard­ware Co Ltd, which sells hard­ware prod­ucts mainly to Euro­pean clients, said that over­ca­pac­ity has been a com­mon prob­lem in his in­dus­try.

Qian said that the com­pany has been try­ing to sell its prod­ucts online to in­di­vid­ual buy­ers at much cheaper prices to re­duce high in­ven­to­ries and be­come more com­pet­i­tive.

Wu Yue, a man­ager at Shang­hai Zai­wang Steel Co Ltd, has been fac­ing sim­i­lar dif­fi­cul­ties.

“The gov­ern­ment has been con­tin­u­ously re­duc­ing the launch of in­fra­struc­ture con­struc­tion projects this year, which di­rectly af­fects the de­mand for raw ma­te­ri­als, es­pe­cially steel,” he said.

As de­mand from the do­mes­tic mar­ket re­mains weak, Wu’s com­pany ex­pects to see a 15 per­cent loss af­ter shut­ting down one of its three pro­duc­tion fa­cil­i­ties in Septem­ber.

“If we don’t see a mar­ket re­cov­ery next year, we’ll prob­a­bly close down the busi­ness to pre­vent fur­ther losses,” said Wu.

In Novem­ber, about 1.92 per­cent­age points of the over­all in­fla­tion growth was at­trib­uted to higher food prices, which in­creased 5.9 per­cent year-on-year, slower than the 6.5 per­cent hike seen in Oc­to­ber, the NBS said.

Non- food prices rose 1.6 per­cent last month from a year ear­lier, un­changed from Oc­to­ber.

The lower CPI fig­ure in Novem­ber brings the first 11 months’ read­ing to 2.6 per­cent, com­pared with the gov­ern­ment’s whole- year tar­get of 3.5 per­cent, which means that head­line in­fla­tion re­mains man­age­able in the near term, said Zhu Haibin, chief econ­o­mist in China at JPMor­gan Chase & Co.

Qu Hong­bin, chief econ­o­mist in China at HSBC Hold­ings Plc, said that the re­cent mod­er­ate in­fla­tion pres­sures im­ply that pol­i­cy­mak­ers will con­tinue to fo­cus on mea­sures to sup­port growth and em­ploy­ment while im­ple­ment­ing struc­tural re­form poli­cies.

“While the sus­tain­abil­ity of the im­prove­ment in ex­ter­nal de­mand re­mains un­cer­tain, it could only lend lim­ited sup­port to China’s growth re­cov­ery, see­ing that do­mes­tic de­mand re­mains the key driv­ing force,” Qu said. Con­tact the writ­ers at chen­jia1@chi­nadaily.com.cn and yu­ran@chi­nadaily.com.cn

GENG GUO­QING / FOR CHINA DAILY

A cus­tomer shops for veg­eta­bles at a su­per­mar­ket in Xuchang, Henan prov­ince. In Novem­ber, food prices went up 5.9 per­cent year-on-year, with veg­etable prices up 22.3 per­cent, ac­cord­ing to the Na­tional Bureau of Sta­tis­tics.

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