China Economy
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China Economy

China’s inflation rate creeps higher as food prices rise ahead of winter

Figures likely to lessen speculation that central bank will take measures to boost economic growth

PUBLISHED : Wednesday, 09 November, 2016, 11:02am
UPDATED : Wednesday, 09 November, 2016, 7:25pm

China reported higher inflation last month as food prices rose ahead of the winter and producer prices jumped on a coal price rally, dampening expectations that the central bank might increase money supply to boost growth.

The consumer price index rose 2.1 per cent year on year in October, up from 1.9 per cent a month earlier, the National Bureau of Statistics said on Wednesday. Food prices, up 3.7 per cent, were the main factor behind the rise, with vegetable prices increasing 13 per cent and pork prices 4.8 per cent.

While consumer inflation is still within the government target of 3 per cent for this year, a rapid price rise in pork and industrial inputs, such as coal, can increase inflationary pressure for monetary tightening.

Xi chairs Politburo meeting on economy, sends hawkish signal on inflation

Jiuzhou Securities chief economist Deng Haiqing said: “It’s possible that China’s CPI will exceed 2.5 per cent in the six months, which means a ‘black swan’ event of an interest rate increase can’t be ruled out in China.”

The central bank has been easing away from monetary easing in recent months as economic growth has stabilised. The country’s economy grew 6.7 per cent in the first three quarters, laying the way for the government to realise its full-year growth target.

“There is some upward pressure on consumer prices in the short term, but overall they are stable,” the People’s Bank of China said in its third-quarter monetary policy implementation report on Tuesday.

China’s exports continue to fall in October despite weaker yuan

The producer price index rose 1.2 per cent last month, after ending 54 months of decline with a 0.1 per cent rise in September, thanks to the rebound in international commodity prices and a recovery in the Chinese economy.

The Politburo shifted its emphasis on economic policy to curb financial risks and asset bubbles at a meeting late last month.

The central bank said on Tuesday that it would stick to “neutral and appropriate” monetary policy.

China’s foreign exchange watchdog on Wednesday lowered the yuan midpoint to 6.7832 against the US dollar from 6.7838. The yuan was trading at 6.7827 at 9.50 am on Wednesday in China.