China inflation: raising costs of public services a ‘necessary step’ to offset property, debt pressures
- Property slump and rising debt piles provide debt-ridden local governments the opportunity to increase the cost of services such as rail fares and utilities
- China’s overall consumer price index, a key gauge of inflation, grew by 0.3 per cent year on year in April, compared with an increase of 0.1 per cent in March
China’s public sector is under pressure to raise prices for some services, including train tickets and utilities, amid tight local finances and a prolonged period of deflationary risks, analysts said.
The cost of some services has been on the rise in recent months, highlighted by a 0.8 per cent year-on-year and 0.3 per cent month-on-month increase in April.
Meanwhile, China’s producer price index – which measures the cost of goods at the factory gate – declined for the 19th straight month in April after falling by 2.5 per cent year on year, compared with a fall of 2.8 per cent in March.
Unlike many Western countries that are troubled by lingering high inflation, China’s CPI has been hovering around zero since April last year, fuelling deflation fears.
The reading in April remained far below the government control target of 3 per cent, providing room for the authorities to increase prices.