China’s positive price performance in July shows the country’s productive macroeconomic policy and the great resilience and potential of China’s economy, experts said.
According to data released by National Bureau of Statistics (NBS) on Aug 9, China’s consumer price index (CPI) has grown at a moderate rate, and the decline in Producer Price Index (PPI) has remained narrow compared to the same period of the previous year.
CPI in July was affected in three ways — the rapid growth of fresh vegetable price in some areas due to heavy rains, the seasonal growth of some service prices in the summer vacation, such as air ticket price and travel agency fees, and the drop of some fresh food price, like pork and fruits, said Yu Qiumei, a senior statistician at NBS. Besides, the narrowing PPI’s decrease is attributed to the price rise in metal processing and textile industries, Yu said.
The modest growth of CPI relieved market’s worries about inflation, and the good performance of PPI is closely related to the move of cutting overcapacity, said Niu Li, an official at State Information Center under the National Development and Reform Commission.
The increase in vegetable price may not last long, though. The CPI in July matches with the overall economic situation, according to Yao Jingyuan, a researcher at the Counselors’ Office of the State Council, adding that the narrowing of PPI’s decline for seven consecutive months reflects the stable economic growth in China.
The positive performance of price defeated the view of stagflation, said He Weida at University of Science and Technology Beijing.
Prerequisites of stagflation consist of economic stagnation and inflation, but China’s economic growth remains positive compared to other countries, and CPI and PPI tendency indicate the country faces lower inflationary pressures at present, He added.
Prudent monetary policy has also served as a support by providing good financial environment for the structural reform, according to a report from the People’s Bank of China.
“If we continue to deepen structural reform and improve modern market system, it is hopeful for the economy to hit the potential growth rate of at least seven percent in the coming five years,” said Tian Guoqiang at Shanghai University of Finance and Economics.
Even though it is expected that CPI and PPI will continue to remain positive in the second half of 2016, the economic development in the future still lies on the performance of the structural reform and global economic environment, said Niu.
“There are some problems when carrying out reforms in State-owned enterprises and financial sector, and those difficulties need to be settled and the role of market in talent and capital allocation should also be effectively improved if we want the economic development to stay sustainable,” Niu added.