China’s inflation rate rises but falls short of 3pc target
Consumer price index increases 1.5pc – less than what the government had hoped, fuelling concerns about a Japan-style deflationary trap
China's consumer inflation picked up slightly in November, but remained well under the government's 2015 price target this year of 3 per cent, raising fears that the economy could be sucked into a Japan-style deflationary trap
With the economy sputtering after years of double-digit growth, analysts predict Chinese consumer prices are unlikely to pick up significantly in the near future due to crumbling commodity and energy prices, overcapacity and weak demand.
READ MORE: China’s inflation rate falls again in further sign of weakening demand in the economy
The data has increased calls from some economists for more stimulus and interest rate cuts to spur growth and prices, even though the November consumer price index (CPI) surprised on the upside, rising 1.5 per cent year on year, from 1.3 per cent in October. A Reuters poll had tipped a 1.4 per cent rise.
“With corporate confidence already at a six year low, persistent deflation might also put the economy at risk of a downward spiral,” said HSBC economists in a note to clients. “More aggressive policy easing still holds the key to stabilise growth in the coming months.”
Wednesday's release from the National Bureau of Statistics also showed factories were plagued by producer price deflation, with the producer price index down 5.9 per cent in November from a year earlier, in line with expectations and flat from October's drop. It marked the 45th straight month of declines in the index.
Economists with the NSBO bank in Beijing estimated that inflation-adjusted lending rates were as high as 10.7 per cent when calculated using PPI, seen as inhibiting fresh investment. On a monthly basis, consumer prices were flat, compared with a 0.3 per cent fall in October.