Chinese consumer prices have risen less than estimated in September and so the deflation influence still plays on the country’s economy. Ministry of National Statistics announced on Sunday new data of the consumer price index that rose by only 0.4% as compared with the previous year much lower than the economists expectation of 0.6%.
Consequently, the incremental and consistent slowdown of consumer prices is supported by the ongoing decline in factory-gate charges, which have now dropped for a twenty-fourth consecutive month. Producer inflation fell by 2.8%, having declined for two consecutive years – a better result than most economists had expected (-2.6%). They could all cumulatively illustrate the severity and increased demand for more policy input to propel China’s economy out of the deflation zone.
The weak inflation data for China emerges at a time that will help complicate the already challenging task of the policymakers as they launched a series of stimuli to spur growth in China. At the beginning of September China proposed the decrease of the interest rates and the corresponding increase in support for the problematic property and stock markets. However, the current economic factors convey the impression that perhaps there is need to step up these measures in order to realized the intended objectives.
Perhaps the most significant fear that may be highlighted by the current position is a deflation hazard. This in a way become a vicious circle of declining spending and investing which denies the economy a proper growth rate and even the employment becomes a challenge. This particular situation is rather concerning for Chinese authorities, as the government always tries to prevent any social unrest and ensure that it would reach its economic growth goals.
China entered a period of delegation that lasted five consecutive quarters through June, making it the longest one since the 1990s. Most analysts agree that such development would probably persist into September and beyond, which supports the contention that action is needed now.
The food inflation has gone up by 3.3 % in September compared to September of the previous year, and fresh vegetables are up by 22.9 %, or some other sectors and sub-groups of the economy are under considerable pressure of price rise. Sluggish spending and exponential output growth have created high competitive pressure and influential adverse price trends in several industries, for instance, electric vehicles and solar technology industries. The Sample concluded that Specific transportation facilities lowered their prices to 5.3 percent by including car prices, whereas automobile manufacturer reduced their sale prices to 2.3 percent.
Chinese authorities have been shown to have been keen on approaching these economic problematics. On Saturday the Finance Ministry pledged more support for the struggling housing market and cash-strapped local governments. These are some of the measures that form part of a package that is aimed at reestablishing consumer and producer confidence in the market and, Hopefully, regain the market demand over time.
Local and international economists and analysts are keeping a close eye on the unfolding situation, most of them stressing the role of proper enforcement of current policies as well as the adoption of novelties aimed at stimulating the growth of the economy. Bruce Pang, chief economist of Jones Lang LaSalle Inc. for Greater China, said that overall average inflation rates also remain much lower than the policy objectives, suggesting weak demand syndrome.
Adjustment to these changing dynamics of economic growth will depend on how effectively the Chinese government will be able to steer between short-term Keynesian policies and structural changes necessary for the long haul. Going forward, the country’s leadership has articulated its desire to transition towards a more sustainable and balanced growth model, which means less reliance on credit and an export-led approach. However, the present deflationary environment may call for more intensive measures to foster domestic demand and consumer confidence.
The consequences of the challenges facing the Chinese economy cannot be dismissed at an international level. Because China is an essential actor in global growth and a dominant participant in global commerce, China’s economic results have implications for markets across the globe. These deflation risks may affect commodities, exchange, and investment choices in both the industry and geographic segments in the short and long term.
Many people will look forward to Beijing in the coming months as there’s a need to policy respond to these shocks on the economy. That is why their policies in countering deflation, encouraging domestic demand, and achieving stable growth will predetermine the future trend of the Chinese economy and the further evolution of the world economy in the future.