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Consumer inflation expected to remain mild over next year

By ZHOU LANXU | China Daily | Updated: 2021-12-10 07:05
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A customer buys vegetables at a supermarket in Handan, North China's Hebei province, Aug 9, 2021. [Photo/Xinhua]

China's consumer inflation is expected to continue the uptrend seen in November but remain overall mild next year, leaving room for monetary policy to bolster the economy, experts said on Thursday.

The country's consumer price index, a main gauge of inflation, grew 2.3 percent year-on-year last month, up from 1.5 percent in October, amid rising prices of vegetables, oil and diesel, the National Bureau of Statistics said on Thursday.

Kang Yong, chief economist at KPMG China, said the uptrend in consumer inflation may continue in 2022 given a recovery in pork prices, a pickup in domestic consumption, a low comparison base, and the passing on of higher commodity prices into downstream consumer goods.

But overall, China's inflation will remain mild and controllable next year as the recovery in consumption is expected to be gradual amid lingering pandemic uncertainties, while the price spike in upstream commodities will be further tempered by restored supply capacity, Kang said.

He added that China's annual growth in CPI may stand at around 0.9 percent year-on-year this year and 2.3 percent next year, which are both expected to be below the government's price targets.

In November, policy efforts to boost the supplies of coal, metals and other commodities have driven down China's growth in the producer price index, which gauges factory-gate prices, to 12.9 percent year-on-year from 13.5 percent in October, the first slowdown in five months.

The readings came amid concerns that global inflationary pressure could persist into 2022, after the US Federal Reserve recently dropped the word "transitory" when describing inflation.

"The difference in monetary policy globally versus China has resulted in the somewhat less inflation scare (in China)," said Philip Li, investment director at Wellington Management, a global fund manager.

The People's Bank of China, the Chinese central bank, has adopted a more prudent policy than many of its peers, resulting in less market liquidity and better controlled inflation, Li said.

The market is awaiting more clues on China's monetary policy next year from the Central Economic Work Conference, after a high-level meeting having required monetary policy to be prudent, flexible and appropriate.

"Consumer inflation may increase in China next year, but only in a mild way that will pose no major constraints on monetary policy," said Chen Dong, head of Asia macroeconomic research at Pictet Wealth Management, a Swiss firm.

To shore up the economy, Chen said the central bank may again cut the reserve requirement ratio in the first quarter of next year, after one to take effect on Dec 15, yet the possibility of an interest rate cut remains low.

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