China is struggling with too little inflation

Prices move too slowly.
Photo: Xiaoyu Yin (Reuters)

While most of the world is experiencing price increases not seen since the 1980s, China has the opposite problem.

Chinese consumer prices rose just 1% in February,
according to National Bureau of Statistics of China. The increase was half the 2.1% increase the country saw in January and well below the 1.7% increase economists asked of the Wall Street Journal had predicted.

China’s exports, meanwhile, fell in the first two months of the year. And last year it was population decreased for the first time in more than half a century, calling into question the country’s ability to meet the 5% GDP target set by Chinese officials for 2023.

The prices that factories pay for raw materials did not do move at all from January to February. This was a change from falling Chinese producer prices in both December and January, and means that an increase in inflation in China could be coming over the next few months.

After China’s overall consumer price index rose just 2% for 2022, Chinese officials set another ceiling of 3% inflation for 2023. This is a full percentage point higher than most central bank targets.

Despite the slow inflation and export data, economists with Capital Economics expect China to end the year with 5.5% GDP, but without the support of more government stimulus.

“Managements clearly want to put the problems of the past few years behind them, get the economy back on track and restore confidence both at home and abroad,” the economists wrote in a research note. “But they also seem to feel that the sugar rush from another round of large-scale stimulus would not be worth the costs in the medium term.”

Leave a Comment

Your email address will not be published. Required fields are marked *

Scroll to Top
%d bloggers like this: