- China's Consumer Price Index has hit its lowest point in nine months, raising concerns about deflation.
- China's economic growth target is expected to face setbacks, and the IMF has predicted a slowdown in growth.
- If low inflation rates persist, it could lead to a rise in real interest rates, increasing corporate borrowing costs.
- The article was summarized using an artificial intelligence-based language model.
- Due to the nature of the technology, key content in the text may be excluded or different from the facts.
December 0.1%... Slowing for Four Consecutive Months
Weak Consumption Despite Stimulus Measures
China's consumer inflation rate has hit its lowest point in nine months, raising concerns about deflation (price decline amid economic downturn).
According to the National Bureau of Statistics of China (NBS) on the 9th, China's consumer price index (CPI) growth rate for December last year was 0.1% year-on-year. This is lower than the previous month's 0.2% and marks a slowdown for the fourth consecutive month. It aligns with market expectations of 0.1% from Reuters and Bloomberg. Last year's annual CPI growth rate was only 0.2% compared to the previous year. Despite the Chinese government's stimulus measures and accommodative monetary policy to boost demand, deflation risks persist due to the real estate slump, local government fiscal crises, and weak consumption. Falling prices can further suppress household consumption, reduce corporate profits, and shrink investment, leading to wage cuts and layoffs. Bloomberg analyzed that this contrasts with other major economies facing accelerating inflation risks.
China's economic growth target is also expected to be thwarted. Last week, President Xi Jinping anticipated that China's economy would have grown by 5% last year, meeting the government's target. However, the International Monetary Fund (IMF) predicts China's economic growth rate for 2024 to be 4.8%. The IMF expects China's economic growth rate to slow to 4.5% this year. Yuetsu, a senior researcher at the Economist Intelligence Unit, stated, "Low inflation rates can lead to a rise in real interest rates," and "more aggressive implementation of monetary easing policies is needed to effectively reduce corporate borrowing costs, which are crucial for economic recovery."
To overcome the domestic consumption slump, Chinese authorities announced yesterday that they would expand subsidies for purchasing not only batteries and electric buses but also smartphones.
Lee Hye-in, Hankyung hey@hankyung.com