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BusinessChina

China registers low inflation as stocks slump

June 9, 2023

China's economy grew, but indicators show demand is weakening, with factory activity falling in May.

https://p.dw.com/p/4SMXv
Chinese transport vehicle delivering containers to port warehouse
China has registered low inflation for May amid a drop in both exports and domestic demandImage: Wang Chun/CFOTO/picture alliance

Inflation in China stayed low in May, according to official figures published on Friday.

The consumer price index (CPI) rose 0.2% on-year, the National Bureau of Statistics (NBS). This was slightly above the figure from April, 0.1%.

Chinese stocks were also flat on Friday amid worries about the health of the world's second-largest economy, despite stocks rallying in Hong Kong and other parts of Asia.

Chinese interest rates low

China has kept interest rates low compared to other major economies.

On Thursday, top economist and government advisor Liu Yuanchun called for regulators to cut borrowing costs to make it easier for small and medium-sized private businesses to secure financing.

He said that many large state-owned firms had loan rates lower than 1.8%, while many private businesses had to pay nearly 9%.

"It'll be better if the rate cut comes as a part of a package of support policies," Liu said on the sidelines of the Lujiazui Forum in Shanghai.

China's six largest state-owned commercial banks lowered interest rates for savers on Thursday in order to boost spending in the country at the request of the central bank.

Factory gate prices fell 

The producer price index (PPI) dropped 4.6% in May, which is the biggest drop since 2016.

PPI has fallen for eight months in a row due to low domestic demand and falling commodity costs.

Exports also decreased in May, state media reported earlier in the week.

Analysts have pointed to the risk of deflation as China's property sector remains saddled with debt and a spurt of growth that followed the removal of COVID-19 restrictions begins to slow down.

sdi/lo (AFP, Reuters)