Soft Chinese inflation, grim global outlook point to more stimulus
BEIJING: Soft Chinese inflation and G20 concerns that the global recovery remains grim are hardening views among some economists that more government stimulus will be needed to support China, the world's second-biggest economy.
Consumer inflation last month remained under the official target of around 3% for this year, data released on Sunday showed, indicating persistently weak domestic demand. The consumer price index (CPI) rose 1.9% in June from a year earlier, compared with a 2.0% increase in May, China's National Bureau of Statistics said. Analysts had expected a 1.8% gain, a Reuters poll showed.
Against that backdrop of slack price growth, international trade remains weak and the country is plagued by massive overcapacity, particularly in coal and steel, and debt-ridden zombie companies. Externally, China faces a global recovery that its trade minister on Saturday described as "complicated and grim".
"In our view, while China reiterates the importance of supply-side reform due to debt and overcapacity concerns, the authorities still need to stimulate demand in order to achieve its growth target," Zhou Hao, senior Asia emerging market economist at Commerzbank in Singapore, said in a note.
The People's Bank of China (PBOC) last cut interest rates on October 23, the seventh time since late 2014.
China's leaders have set an economic growth target of 6.5% to 7 % for 2016. The economy expanded 6.9 percent last year, its slowest pace in a quarter of a century.
"Of course, further policy easing is still on the cards, and we hold our view that the PBOC will cut both interest rates and reserve rate requirement this month," Zhou said.
Other economists say authorities should use fiscal policy to boost growth, adding that question marks remain over the effectiveness of further monetary easing. In China, food prices rose 4.6% in June, compared with a 5.9% gain in the previous month.
Recent flooding in China "is likely to push vegetable and fruit prices higher in the coming months," ANZ economists Raymond Yeung and Louis Lam wrote in a research note. Non-food prices inched up 1.2% versus May's 1.1% gain.
A top government-backed think tank forecast in late June that consumer prices will likely rise 2% for the year, while the long decline in producer prices will ease. The producer price index (PPI) dropped 2.6% in June from a year earlier. Analysts had expected PPI to fall 2.5%.
Consumer inflation last month remained under the official target of around 3% for this year, data released on Sunday showed, indicating persistently weak domestic demand. The consumer price index (CPI) rose 1.9% in June from a year earlier, compared with a 2.0% increase in May, China's National Bureau of Statistics said. Analysts had expected a 1.8% gain, a Reuters poll showed.
Against that backdrop of slack price growth, international trade remains weak and the country is plagued by massive overcapacity, particularly in coal and steel, and debt-ridden zombie companies. Externally, China faces a global recovery that its trade minister on Saturday described as "complicated and grim".
"In our view, while China reiterates the importance of supply-side reform due to debt and overcapacity concerns, the authorities still need to stimulate demand in order to achieve its growth target," Zhou Hao, senior Asia emerging market economist at Commerzbank in Singapore, said in a note.
The People's Bank of China (PBOC) last cut interest rates on October 23, the seventh time since late 2014.
China's leaders have set an economic growth target of 6.5% to 7 % for 2016. The economy expanded 6.9 percent last year, its slowest pace in a quarter of a century.
"Of course, further policy easing is still on the cards, and we hold our view that the PBOC will cut both interest rates and reserve rate requirement this month," Zhou said.
Other economists say authorities should use fiscal policy to boost growth, adding that question marks remain over the effectiveness of further monetary easing. In China, food prices rose 4.6% in June, compared with a 5.9% gain in the previous month.
Recent flooding in China "is likely to push vegetable and fruit prices higher in the coming months," ANZ economists Raymond Yeung and Louis Lam wrote in a research note. Non-food prices inched up 1.2% versus May's 1.1% gain.
A top government-backed think tank forecast in late June that consumer prices will likely rise 2% for the year, while the long decline in producer prices will ease. The producer price index (PPI) dropped 2.6% in June from a year earlier. Analysts had expected PPI to fall 2.5%.
