• Inflation in China registered an increase of 0.1% year-over-year in April, according to numbers from the National Bureau of Statistics (NBS), falling below expectations.
• Some analysts are warning about the dangers of deflation, even calling on the Chinese government to deliver cash handouts in order to push consumer demand.
• Standard Chartered has explained they expect inflation levels to hit 0% in the next months, while Li Daokui, a professor at Tsinghua University, has proposed delivering cash handouts to citizens to spur demand.
Low Inflation Numbers in China
Inflation in China registered an increase of 0.1% year-over-year in April, according to numbers from the National Bureau of Statistics (NBS) of the country, falling below expectations. The Consumer Price Index (CPI) registered an increase of 0.1%, dropping from 0.7% registered in March due to a decline in food and beverages prices which went from 2.4% in March to less than 1% in April. Core inflation rose 0.7%. These low inflation numbers have been worrying analysts as a testament to China’s slow economic recovery after the coronavirus pandemic.
Analysts Worry About Deflation
Analysts are warning about the dangers of deflation that could happen due to these low inflation numbers and have called on the Chinese government for solutions such as providing cash handouts or other incentives for citizens‘ consumption habits in order push consumer demand and avoid potential deflationary trends ahead.
Standard Chartered Expects Inflation Level To Hit Zero
Standard Chartered has explained they expect inflation levels to hit 0% over the next months due mainly to a high comparison base caused by crude oil price spikes during 2021’s first half and predicted a growth rate higher than 5%, without needing any adjustments for interest rates which are now at 1%.
Li Daokui’s Proposal
Li Daokui, professor of economics at Tsinghua University and former member of PBOC advisory board, has proposed delivering 500 billion yuan worth of cash handouts directly into citizens’ accounts as a way boost spending power and potentially avoid deflationary pressures ahead; this would also result on 300 billion yuan worth taxes derived from this extra spending enabled by said handouts that would be collected by Chinese state itself.
Zou Lan’s Dismissal Of Concerns
Zou Lan official with PBOC dismissed worries regarding deflationary pressures stating that “there is no basis for long-term deflation or inflation” and expecting consumer demand will pick up during second half 2021