Business

China’s consumer, factory prices skid as demand falters

Published

1 year ago

April 11, 2023

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China’s consumer inflation hit an 18-month low and factory-gate price declines sped up in March as demand stayed persistently weak, shoring up the case for policymakers to take more steps to support the uneven economic recovery.

In contrast to surging prices globally, China’s retail and producer inflation has remained anaemic as the consumer and industrial sectors struggle to recover from their pandemic hit. Analysts now think consumer inflation could fall short of Beijing’s official targets this year.

The consumer price index (CPI) rose 0.7% year-on-year, the slowest pace since September 2021 and weaker than the 1.0% gain in February, the National Bureau of Statistics (NBS) said on Tuesday. The result fell short of the 1.0% rise tipped in a Reuters poll.

“China’s March inflation report suggests that the Chinese economy is running a disinflation process, which points to bigger room for monetary policy easing to boost demand,” said Zhou Hao, economist at Guotai Junan International.

The producer price index (PPI) fell 2.5% year-on-year, the fastest pace since June 2020 and compared with a 1.4% drop in February. The PPI has fallen for six straight months.

China’s yuan hit a more-than-one-week low against the dollar on Tuesday morning following the data, as investors stepped up bets domestic interest rates could be cut. Shanghai’s benchmark stock index (.CSI300) fell 0.25%, reversing a slight uptick in the opening.

Food price inflation, a key driver of CPI, slowed to 2.4% year-on-year from 2.6% in the previous month. On a month-on-month basis, food prices fell 1.4%.

That pushed the CPI down 0.3% from a month earlier after a 0.5% fall in February, dashing expectations of no change.

FALLING SHORT

The government has set a target for average consumer prices in 2023 to be about 3%. Prices rose 2% on year in 2022.

“We think consumer price inflation will rebound in the coming months as the labour market tightens again and will peak at 2.3% in early 2024,” said Zichun Huang, China economist at Capital Economics. “But it will be well below the government’s ceiling of ‘around 3.0%’, and the increase in inflation will be far smaller than what was seen elsewhere when they opened up.”

Policymakers have pledged to step up support for the economy, which recorded one of its worst performances in nearly half a century last year due to strict COVID-19 curbs.

Recent data showed China’s economic rebound remained uneven in March with the services sector seeing strong recovery but the sprawling manufacturing sector losing momentum amid still-weak export orders.

Producer prices will likely continue their downturn in the coming period because of weak trade and slow recoveries in consumption and real estate investment, said Bruce Pang, chief economist at Jones Lang Lasalle.

“Policies need to prioritise consumption and continue to step up efforts to expand domestic demand.”

Import-dependent industries saw further price declines, with falls in the oil and gas extraction speeding up to 15.7% from 3.0% in February, NBS said in a separate statement.

Producer prices were unchanged from a month earlier.

The country’s central bank cut banks’ reserve requirement ratio in March to support an economy facing headwinds including weak exports and the property downturn.

Beijing needs to “try every method” to stabilise exports to developed countries, Premier Li Qiang said on Friday, warning that the impact of the global slowdown on the domestic economy remains a key concern.

Analysts see limits to China’s policy support.

“The PBoC just cut the RRR by 25bp at the end of March. However, Beijing still has no appetite to launch a massive stimulus on concerns of distortions and financial risks,” analysts at Nomura said.

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Business

Chinese firm aims to expand investments in Pakistan, shows interest in mining sector

Published

18 hours ago

May 17, 2024

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Chinese firm aims to expand investments in Pakistan, shows interest in mining sector

A notable Chinese company has expressed keen interest in expanding its investment in Pakistan, in yet another sign of investor confidence boost in the leadership of Prime Minister Shehbaz Sharif.

A delegation from Chinese firm MCC Tongsin Resources led by its Chairman Wang Jaichen called on PM Shehbaz here on Friday.

The premier invited the Chinese company to invest in Pakistan’s mining sector and manufacturing of export goods.

Shehbaz assured the delegation that his government would extend all-out facilitation to the company from minerals exploration and processing to the export of goods.

The PM instructed the relevant federal ministers and officers to continue consultation with the Chinese firm, taking the Balochistan chief minister, provincial departments and stakeholders on board.

The delegates reposed trust in PM Shehbaz’s leadership, and expressed keen interest in enhancing their investment in Pakistan’s mining and minerals sectors.

The delegation briefed Prime Minister Shehbaz about the construction of a mineral park in Pakistan and their future investment plans.

The premier welcomed the Chinese firm and highlighted the priority steps by his government to promote foreign investment in Pakistan.

He said that being a time-tested friend, China supported Pakistan in every difficult hour for which the Pakistani nation was grateful to the leadership and people of China.

Federal ministers Ahad Khan Cheema, Dr Musaddik Malik, Rana Tanveer Hussain, Jam Kamal Khan and relevant senior officers attended the meeting.

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Business

Govt jacks up power price by Rs1.47 per unit

Published

18 hours ago

May 17, 2024

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Govt jacks up power price by Rs1.47 per unit

The government on Friday increased the electricity tariff by Rs1.47 per unit.

According to Nepra sources, the collection from consumers will take place in August, September, and October.

The electricity companies had requested the funds as part of the third quarter adjustment for 2023-2024, seeking Rs 31.34 billion under capacity charges.

Sources said that Rs5.57 billion were requested for operation and maintenance costs, and Rs12.38 billion were requested for the transmission and distribution impact under monthly fuel cost adjustment.

Previously, Nepra had completed the hearing on the electricity companies’ request under the quarterly adjustment.

Nepra approved the Power Division’s request, allowing an increase of Rs 1.45 per unit in electricity prices.

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Business

Hong Kong allows China’s digital yuan to be used in local shops

Published

18 hours ago

May 17, 2024

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Hong Kong allows China's digital yuan to be used in local shops

Hong Kong will allow mainland China’s pilot digital currency to be used in shops in the city, the head of its de facto central bank said on Friday, marking a step forward for Beijing’s efforts to internationalise the yuan amid rising geopolitical tensions.

The programme, backed by Beijing, will allow mainland Chinese and Hong Kong residents to open digital yuan wallets via a mobile app developed by China’s central bank and will permit them to make payments in retail shops and some online stores in Hong Kong and in mainland China.

Transactions using e-CNY, predominantly for domestic retail payments in China, hit 1.8 trillion yuan ($249.27 billion) as of end of June 2023, with 120 million digital wallets opened, according to the latest disclosure from China’s central bank.

Using the wallet, users can make payments at over 10 million merchants in 17 provinces and cities in the mainland.

Each wallet used in the city will be subject to a balance limit of 10,000 yuan, with single transactions and daily payments capped at 2,000 yuan and 5,000 yuan, respectively, officials from the Hong Kong Monetary Authority said.

Peer-to-peer transfers will not be allowed at the moment, according to the HKMA.

“By expanding the e-CNY pilot in Hong Kong .. users may now top up their wallets anytime, anywhere without having to open a mainland bank account, thereby facilitating merchant payments in the mainland by Hong Kong residents,” HKMA Chief Eddie Yue said.

Currently, users of other digital yuan wallets such as those operated by Ant Group and Tencent can make payments in the city.

Industrial and Commercial Bank of China, Bank of China Ltd, China Construction Bank Corp and Bank of Communications Co have been selected as e-CNY wallet operators.

The yuan’s use in global finance remains low, though it has shown steady increases.

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