CPI growth of 0.7% in March leaves more room for monetary policy maneuvering in China: experts
Published: Apr 11, 2023 11:58 AM Updated: Apr 11, 2023 11:53 AM
Shoppers at a supermarket in Qingzhou, East China's Shandong Province on February 10, 2023 Photo: IC

Shoppers at a supermarket in Qingzhou, East China's Shandong Province on February 10, 2023 Photo: IC

China's consumer price index (CPI), a main gauge for inflation, rose slightly in March by 0.7 percent year-on-year but was down 0.3 percent from February, data from the National Bureau of Statistics (NBS) showed on Tuesday.

Experts noted that the figure indicated that China's monetary policy has more room to maneuver in order to accelerate economic recovery,while the country is unlikely to suffer from any form of deflation.

Food prices increased 2.4 percent year-on-year, contributing to the growth rate by 0.43 percentage points, per NBS data. 

Economic and social activity continued to recover in March, while supplies for domestic consumption remained sufficient, according to Dong Lijuan, a statistician from the NBS.

In month-on-month terms, the CPI edged down by 0.3 percent, with food prices dropping 1.4 percent, pulling down CPI by 0.27 percentage points. 

Amid the increase in market supply of fresh vegetables as the weather warms up, vegetable prices declined 7.2 percent in March from February, dragging down the CPI by 0.17 percentage points, accounting for nearly 60 percent of the drop. Pork prices saw a decrease of 4.2 percent compared with a month ago due to sufficient market supply, lowering the CPI by 0.06 percentage points. 

Among non-food items, the price of most services rose as travel demand edged up in March, with tourism costs up 3.5 percent and airfares ticking up by 2.9 percent. 

China has been implementing an accommodative monetary policy in contrast to aggressive interest rate hikes seen in the Western economies, and the March figures indicated more room for more monetary stimulus, Dong Dengxin, director of the Finance and Securities Institute at the Wuhan University of Science and Technology, told the Global Times on Tuesday. 

China is widely viewed as being safe from deflation, as consumer price levels will likely remain moderate under balanced market demand and supply, and at the same time, the Chinese economy is rapidly recovering thanks to the government's pro-growth macro policy, Zhou Maohua, an economist from Everbright Bank told the Global Times on Wednesday, adding there are no signs of CPI contraction.

China's GDP growth is predicted to reach 5.1 percent in 2023, with strong private investment, World Bank President David Malpass said on Monday at the organization's spring meeting call, noting the stability of China's currency and the countercyclical nature of the country's monetary policy. 

Dong stressed that the short-term price downturn can't fully reflect the recovery in consumption demand, especially after the Chinese New Year holidays, while it will take time for supportive measures to take effect after the optimization of the country's COVID-19 response. 

Dong expected moderate growth of CPI over the upcoming month as the economic recovery will continue to ramp up consumption demand while also boost market confidence. 

The producer price index (PPI) dropped 2.5 percent year-on-year and remained flat month-on-month, the NBS data showed. 

Global Times