China’s annual inflation rate has dropped to -0.3%, raising apprehensions about the broader global economic repercussions of the nation’s sluggish recovery from the COVID pandemic.
The decline in the consumer price index (CPI) for July on a year-on-year basis follows recent revelations that both imports and exports in China experienced steeper drops than anticipated in the previous month. Initial expectations had centered on a prosperous business resurgence as China eased lockdown restrictions, potentially contributing to a global economic upturn.
Yet, amid signs of a faltering recovery and waning consumer confidence, apprehensions are growing that China might be stepping into an era of notably reduced economic growth. This scenario could potentially lead to stagnation in both prices and wages.
Officials disclosed that the producer price index (PPI) also experienced a year-on-year decrease of 4.4%, marking the tenth consecutive drop in factory gate prices. This contrasts with the situation in many Western countries, such as the UK, grappling with high inflation, which prompted central banks to increase interest rates in efforts to curb surging prices.
Gary Ng, a senior economist at Natixis, remarked that the recent figures underscore the fact that China’s economic rebound has not been robust enough to counterbalance weakened global demand and elevate commodity prices.
The annual decrease in CPI last month has been attributed to a significant drop in pork prices, resulting from abundant supplies that dampened demand. However, on a month-on-month basis, there was a 0.2% rise, driven by a surge in holiday travel.
In the year 2022, China maintained an average CPI rate of 2%, and Beijing officials have set a target of around 3% for this year.