Official data released on Friday revealed that Chinese inflation remained unchanged in May despite requests for a rate decrease and further government support as the nation’s economy falters due to weakening demand and declining exports.
China inflation stays low: The National Bureau of Statistics (NBS) reported that the consumer price index (CPI) increased by 0.2 percent yearly from 0.1 percent in April.
The result matched the forecasts of the analysts surveyed by Bloomberg.
The near-zero inflation illustrates the difficulties authorities face as they attempt to revive the economy, even though Beijing has kept interest rates low compared to other major nations.
Liu Yuanchun, a renowned economist and government consultant, called on authorities to significantly reduce borrowing costs on Thursday to lessen the financial strain on small and medium-sized private firms.
According to Liu, major state-owned corporations had higher borrowing costs than private companies, according to Bloomberg News.
On the sidelines of the Lujiazui Forum in Shanghai, he remarked that although many private businesses had to pay close to nine percent, large state-owned enterprises had credit rates below one and a half percent.
It will be preferable, he continued, if the rate reduction is included with a set of supportive policies.
Following requests from the central bank, China’s six main state-owned commercial banks on Thursday lowered interest rates for depositors to encourage spending, according to announcements on their websites.
The producer price index (PPI), which tracks wholesalers’ prices, fell by a larger-than-anticipated 4.6 percent in May, following a 3.6 percent loss in April. This was the largest decline since 2016.
Due to weak domestic demand and declining commodity prices, PPI has decreased for eight months.
Despite the abolition of stringent pandemic regulations at the end of last year, other economic figures recently made public also indicate deterioration in the world’s second-largest economy.
Export Decline and Economic Strain Amidst Debt-Ridden Real Estate Market and Global Slump
According to official media reports from earlier in the week, exports fell in May for the first time since February, snapping a two-month growth streak as the post-Covid bounce waned.
China’s debt-ridden real estate market and the global economic slump are straining the country’s economy.
“The risk of deflation is still weighing on the economy,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management.
He stated that “the government has not sent a clear signal on potential policy stimulus” and that the upcoming policy evaluations might occur beyond July.
“We still think a tightening labor market will eventually put some upward pressure on inflation later this year,” Capital Economics analysts said.