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China’s Inflation Slows Down Marking the Lowest Rate in Two Years

The latest report from China’s National Bureau of Statistics indicates that inflation increased by a mere 0.1% YoY in April, falling below expectations. This has caused some analysts to worry about the possibility of deflation. To avert this situation, some experts are proposing that the Chinese government consider giving cash handouts to boost consumer demand.

China’s Low Inflation

Newly published statistics from China’s National Bureau of Statistics (NBS) indicate that China, a major global economy, has disclosed its most meager inflation numbers in more than two years. The (Consumer Price Index (CPI)  has only increased by 0.1% on a year-over-year basis, marking a substantial decrease from the 0.7% that was registered in March.

The decline in costs was partially caused by a decrease in the prices of food and beverages, which fell from 2.4% in March to less than 1% in April. Nevertheless, core inflation, which omits the costs of food and drinks, surged by 0.7% on an annual basis. These numbers did not meet the nation’s estimated limit of 3% for the year, suggesting that it is improbable to surpass this threshold.

Proposals to Avoid Deflation

Helen Qiao, BofA’s top economist in China, suggests that China’s low inflation rate may be a result of insufficient demand, which could lead to deflation if it continues. 

Qiao points out that the People’s Bank of China appears to have better inflation control than other major central banks. China has managed to maintain an average inflation rate of 1.8% in the consumer price index, which is one of the lowest 3-year averages seen since 2003.

China Inflation Compared to Other Nations 

According to a report from the South China Morning Post, inflation rates are soaring worldwide and have hit a 40-year high in the US, mainly due to the conflict in Ukraine, which has led to a steep increase in food and energy prices.

 However, China has been able to maintain a relatively low inflation rate by adopting a cautious approach to economic stimulus during the pandemic and carefully selecting the goods and services in its CPI basket. As of March 2023, China’s average annual inflation rate was around 2.0%. Additionally, in May 2023, China’s core CPI inflation rate was notably lower than that of Japan.