Unlike other economic powerhouses, China saw prices fall last year, paving the way for the possibility of lower interest rates in support of measures undervalued by the housing crisis.
In 2021, inflation was 0.9% (and 1.5% year-on-year in December and 2.3% in November), according to the National Statistics Office.
This is a very slow pace compared to the pace recorded a year ago (2.4%) due to the complete cessation of activity in China in early 2020 after the spread of Covit-19.
On the other hand, the rapid pace of inflation in the euro zone and the United States is worrying.
The prices of consumer goods in the United States rose 7% in 2021, the biggest increase since June 1982, according to official figures published on Wednesday.
Jerome Powell, chairman of the US Federal Reserve, said this week that restoring price stability was “important” in justifying higher US interest rates this year.
This Chinese trend is partly explained by the fall in food prices, while inflationary fears hang over the world markets.
The decline in pork (-36% per year) is significant, making it the most consumed pork in the country.
The price of pork has doubled in recent years due to the African swine flu epidemic which devastated farms. However, prices have remained stable with the fall of the disease in 2021.
In a restricted outbreak environment, authorities urged people to do precautionary shopping in early November by urging people to create food reserves with lockdown and isolation measures.
In terms of producer prices, inflation slowed last month, rising only 10.3% year-on-year to 12.9% in November.
The factory outlet price index in September (13.5%) saw its biggest increase in more than 25 years.
On average, producer prices increased by 8.1% in 2021 after falling by 1.8% a year ago.
“Producer prices are expected to continue falling in the coming months,” said China Yu, an analyst at Capital Economic Group.
He further warned that “the re-emergence of the epidemic could lead to further disruption in distribution networks”.
About 20 million people have been isolated in three weeks in three cities across the country, especially since the appearance of government prosecutions, including the clumsy Omicron.
Lu Ding, an analyst at investment bank Nomura, sees the price cut as a “small cut in central bank interest rates” to support a weakened economy.
Xiwei Zhang, an economist at Pinpoint Asset Management, who expects interest rates to fall, also warned that a resurgence of epidemics in China “poses additional risks for the economy”.
Towards lower interest rates
China has largely recovered from the initial outbreak shock, but random COVID-19 hotspots in the country are operating slowly.
In addition, the recovery has been hampered by rising commodity prices and the real estate crisis, with developer Evergrande on the verge of bankruptcy.
The debt burden of the sector leader group is around 260 billion euros. She has been trying for months to sell the apartments by paying her interest.
The construction and real estate sector accounts for more than a quarter of China’s GDP and serves as a driving force for many sectors, such as steel and furniture.
Rising prices for labour, raw materials and energy, in a context of global distribution in a tense situation, are negatively affecting companies in the world’s second largest economy and affecting consumption.
To reinforce this decision, Beijing in December lowered the reserve requirement rate for banks in order to increase the share of deposits they hold in their coffers.
The central bank also lowered the benchmark lending rate for the first time in two years.
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