In­fla­tion weak­ens

Soften­ing of de­mand prompts calls for added pol­icy sup­port

China Daily (Hong Kong) - - FRONT PAGE - By WANG YANFEI wangyan­[email protected]­

China’s con­sumer in­fla­tion and fac­tory-gate prices rose at a weak­erthan-ex­pected rate in De­cem­ber, data re­leased on Thursday showed.

An­a­lysts said more pol­icy sup­port is needed to boost mar­ket sen­ti­ment to keep in­fla­tion at rea­son­able lev­els amid lin­ger­ing wor­ries about de­fla­tion­ary risks as the econ­omy faces down­ward pres­sure.

Prices of in­dus­trial prod­ucts slack­ened in De­cem­ber from the pre­vi­ous month. The pro­ducer price in­dex, which mea­sures fac­tory-gate prices, rose 0.9 per­cent year-onyear, hit­ting the low­est level since Septem­ber 2016, ac­cord­ing to the Na­tional Bureau of Sta­tis­tics.

In 2018, the pro­ducer price in­dex rose 3.5 per­cent year-on-year, ac­cord­ing to the bureau.

The weak­ness came from weaker do­mes­tic de­mand and low raw ma­te­rial prices, an­a­lysts said.

The slow­down in PPI in­fla­tion has been driven mainly by oil and nat­u­ral gas ex­ploita­tion, fuel pro­cess­ing, chem­i­cal prod­ucts man­u­fac­tur­ing.

Con­sumer in­fla­tion, mea­sured by the con­sumer price in­dex, rose 1.9 per­cent year-on-year in De­cem­ber, com­pared with 2.2 per­cent in Novem­ber, ac­cord­ing to the NBS.

China’s con­sumer in­fla­tion tar­get was set at no higher than 3 per­cent for last year. The con­sumer price in­dex rose 2.1 per­cent year-on-year in 2018, up from 1.6 per­cent in 2017, the NBS said.

Li Huiy­ong, an in­vest­ment man­ager at Hwabao WP Fund Man­age­ment, said fur­ther re­lax­ation of mon­e­tary pol­icy is needed to cushion down­ward risks of in­fla­tion, as a con­tin­ued cool­ing of in­fla­tion might put higher pres­sure on the econ­omy cou­pled with some other weak­en­ing eco­nomic in­di­ca­tors.

“The cur­rent low con­sumer in­fla­tion level leaves plenty of room for pol­i­cy­mak­ers to re­lax pol­icy. Over­all in­fla­tion might con­tinue to face down­ward risks in the first half, but some pos­i­tive fac­tors, in­clud­ing a com­bi­na­tion of do­mes­tic pol­icy stim­u­lus and ris­ing oil prices driven by pos­si­ble OPEC oil sup­ply cuts, are ex­pected to help in­fla­tion lev­els re­main at an ap­pro­pri­ate level in the sec­ond half this year,” said Li He, an an­a­lyst at the Bank of China re­search in­sti­tute.

Some mea­sures have been in the pipe­line, sug­gested by re­cent sig­nals sent by the China’s reg­u­la­tory au­thor­i­ties.

Ear­lier this month, the Peo­ple’s Bank of China, the cen­tral bank, pledged to re­duce the re­serve ra­tio re­quire­ment — money fi­nan­cial in­sti­tu­tions must hold in re­serve as a share of to­tal de­posits — by 1 per­cent­age point, which is ex­pected to in­ject nearly 800 bil­lion yuan ($118 bil­lion) into the econ­omy.

The an­nounce­ment came af­ter Premier Li Ke­qiang called for an in­crease in fi­nanc­ing sup­port for small busi­nesses dur­ing his visit to three large State-owned banks last week.

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