Consumer prices in China to rise at ‘moderate pace’ this year

Mainland China consumer prices are expected to rise at a moderate pace, but the world’s second-largest economy is still expected to be hit hard by weak global demand and stockpiles of certain goods, according to a government report.

The report by the price monitoring centre of the National Development and Reform Commission also warned that falling producer prices could exacerbate the business outlook for companies plagued by overcapacity. The report, published by the China Securities Journal, said: “[Overall] the situation of price changes in 2016 should turn out to be better than the previous year ... In some sectors prices will continue to fall and that will add downward pressure on some companies and the economy.”

But the economic outlook would remain bleak owing to uncertainties in the global economy and the urgent need for the mainland to clear inventories in industries such as steel and coal.

China’s consumer price inflation rises 2.3pc – more than expected – as food prices surge, but trend ‘not likely to go on’

The mainland’s economy expanded 6.9 per cent in 2015, the slowest pace in 25 years as the leadership strived to transform the growth model by shifting focus from exports and investment to domestic consumption.

Beijing started to embrace a flexible monetary policy aimed at sustaining growth last year, which led to price increases in food and services. But inflation would have a minimal impact on the national economy, the top planning agency said.

An orderly increase in prices should benefit overall growth as companies expand production to tap consumer demand.

Mainland China consumers more upbeat than regional peers

But inflation resulting from monetary easing would not be enough to improve the fundamentals of the economy as it made little difference to the balance between supply and demand, the report said.