ANN/CHINA DAILY – Amidst the backdrop of China’s ongoing economic recovery, officials and international experts have expressed confidence in the nation’s ability to stave off deflationary pressures, thanks to continued policy support and positive economic indicators.
National Development and Reform Commission Deputy Head Cong Liang pointed out the cautious trend in prices since the year began, prompting attention. However, after careful consideration of price levels, demand resurgence, economic growth, and money supply factors, Cong confidently stated during a news conference that there’s no impending deflation threat to the Chinese economy. He emphasised that China’s economic trajectory remains firmly on the path of recovery.
China’s consumer price index, a major gauge of inflation, showed a positive growth of 0.1 per cent year-on-year in August amid recovering domestic demand characterised by accelerated retail sales, a pickup in lending activity and signs of a property market uptick in some regions, official data showed.
Price levels are likely to continue to improve and reach close to the annual average as market demand recovers while the unfavourable base effect fades, Cong said.
He added that policymakers will amplify macroeconomic adjustments while focusing on expanding domestic demand, boosting confidence and preventing risks.
“The economy will pick up with a positive long-term outlook as positive factors add up while the policy effect accumulates.”
ASEAN+3 Macroeconomic Research Office Chief Economist Hoe Ee Khor said he does not see China anywhere near deflation. “China’s economy is nowhere near a state where the economy is seeing very sluggish demand and low credit or money supply growth – conditions usually associated with deflation.”
Thanks to well-calibrated and targeted policies and a gradual recovery in external demand, China’s economy should continue to regain its vitality through 2023 and pick up moderately in 2024, which does not indicate deflationary outcomes, Khor said.
“We think that low inflation is going to be temporary while deflation is unlikely,” Asian Development Bank’s (ADB) resident mission in China Senior Economist Yothin Jinjarak said. In the latest edition of the Asian Development Outlook, issued on Wednesday, the ADB forecast that China’s CPI growth will reach 0.7 per cent this year and two per cent in 2024, compared with a 0.7-per-cent growth in the first half of this year and a 0.3 per cent drop in July.
Cedrus Group Chairman Rani Jarkas said China’s low inflation actually provides scope for injecting more stimulus. “China’s GDP growth was very strong in the first half of 2023, and this trend will continue in the fourth quarter amid rebounding consumer confidence.”
People’s Bank of China Monetary Policy Department Head Zou Lan said the central bank will strengthen counter-cyclical adjustments as there remains ample policy space to deal with any greater-than-expected challenges.
Zou said the central bank will keep liquidity conditions ample, lower financing costs of the real economy and encourage financial institutions to reprice outstanding mortgages and support the resolution of local government debt risks.
“Various tools in reserve will be used to improve the supply-demand relationship in the foreign exchange market to resolutely fend off the risk of exchange rate overshooting,” Zou said, adding that the Chinese renminbi has strengthened against non-dollar currencies since mid-July despite weakening against the greenback.
Jarkas said the private Swiss financial group believes the renminbi has bottomed out and will strengthen in the next eight months due to the waning strength of the US dollar and growing confidence in the Chinese economy.
