Despite the slower pace of price growth in China since the beginning of the year, concerns over deflation in the country are unwarranted, as its economy is on a solid recovery track, thanks to pro-growth policies, say officials and analysts.
According to the National Bureau of Statistics, China’s consumer price index (CPI), a key measure of inflation, rose 0.7 percent YoY in March. This is compared with gains of 2.1 percent and 1 percent in January and February, respectively.
At a press conference this week, Fu Linghui, a spokesperson with the National Bureau of Statistics, said that deflation is not evident in China at present and will not appear in the next stage.
Fu cited a mild 1.3 percent YoY uptick in the CPI and a robust 4.5 percent GDP expansion in the first quarter of the year, as well as a relatively fast growth of 12.7 percent in M2, a broad measure of money supply that covers cash in circulation and all deposits, at the end of March.
Zou Lan, an official with the People’s Bank of China, said that rapid monetary credit growth and a fall in prices were essentially a result of time lags. Compared with supply, demand recovery is relatively slow as it takes time to lift people’s consumption willingness, especially when it comes to bulk consumption, according to Zou.
Looking forward, Zou said that China’s consumer demand would revive as the effects of the supportive financial policies become more evident. As the aggregate supply and demand are generally balanced, the monetary conditions are reasonable and moderate, residents’ expectations are stable, and there is no long-term deflation or inflation basis in the country, Zou added.
Overall, experts are optimistic about China’s economic recovery, with Ming Ming, the chief economist at CITIC Securities, saying that the possibility of deflation in China is not high.