China’s inflation rise belies persistent economic challenges expected in months following reopening

China’s consumer price index (CPI) rose by 2.1 per cent in January, but ‘golden week’ spending did not have as much of an impact on inflation as expected

Signs of a weak economic recovery are still visible, and analysts say China is likely still months away from fully emerging from the shadow of Covid

3-MIN READ3-MIN

Producer price index (PPI), which reflects the prices that factories charge wholesalers, grew by fell by 0.8 per cent last month, down from falling by 0.7 per cent in December. Photo: AFP

Published: 9:39am, 10 Feb 2023Updated: 9:50am, 9 Mar 2023

China’s uptick in inflation is being seen as a reflection of how its consumer market gradually began awakening over the Lunar New Year from a long coronavirus-induced slumber. And analysts say that while the nation’s economic recovery still faces challenges, the upward trajectory should hold steady all year.

The consumer price index (CPI) rose by 2.1 per cent in January from a year earlier, up from 1.8 per cent growth in December, according to data released by the National Bureau of Statistics (NBS) on Friday.

The slow market rebound follows China’s lifting of its disruptive zero-Covid restrictions in December, and last month’s national holiday further helped rejuvenate suppressed demand. But the constrained supply side is likely to take several months to catch up with demand, as pundits expect the shadows of Covid will linger for a while.

“As China awakens from its Covid-19 slumber, households and businesses are regaining their confidence,” said Harry Murphy Cruise, an economist with Moody’s Analytics.

Travel during the Lunar New Year holiday week reached its highest level in four years, and box office receipts exceeded pre-pandemic levels. These drove up travel and entertainment prices, which suggest that “households are making up for lost time when it comes to services that fell victim to repeated lockdowns”, Cruise said.