Chinese inflation was unchanged at a near five-year low of 1.6 percent in October, the government said Monday, with analysts warning the world's number two economy is facing deflationary risks. The consumer price index (CPI) figure released by the National Bureau of Statistics is the weakest since January 2010 and matched the median prediction of 1.6 percent in a Wall Street Journal poll.
In the first 10 months of the year, the CPI came in at 2.1 percent year on year, well short of the 3.5 percent annual target set by the government in March. The producer price index (PPI) - a measure of costs for goods at the factory gate and a leading indicator of the trend for CPI - fell 2.2 percent year on year and was the weakest since March's fall of 2.3 percent, the bureau said.
The figures add to worries about deflation in the Asian giant and ANZ analysts Liu Ligang and Zhou Hao said in a research note that risks will likely increase with the economy expected to slow further in the coming quarters. "This is a significant risk facing China's economy, which requires China's policymakers to monitor the situation closely and take actions swiftly," they said.
The data will give the central People's Bank of China some room to fine-tune monetary policy to kick-start economic growth, which stood at 7.7 percent last year, maintaining its slowest pace in more than a decade. Adding to economic woes were figures released Saturday that showed growth in exports and imports slowing further last month. Exports expanded 11.6 percent year-on-year, compared with 15.3 percent in September, while imports rose 4.6 percent, down from 7.0 percent.
Officials are targeting economic growth of "about 7.5 percent" this year, the same as last year's objective. Moderate inflation can be a boon to consumption as it encourages consumers to buy before prices go up, while falling prices encourage shoppers to delay purchases and companies to put off investment, both of which can hurt growth. China's PPI has remained in negative territory for 32 straight months. The last increase was in January 2012, when it rose marginally by 0.7 percent. Tightened government spending amid President Xi Jinping's anti-corruption campaign, an economic slowdown led by property weakness, and falling commodity prices combined with a strong Chinese currency will "only exacerbate China's PPI deflation", said Liu and Zhou. China's vast and crucial property sector is struggling in the face of oversupply.
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