China's economy stumbling with inflationary pressures

The month of November cast another dark shadow on the Chinese economy which is currently facing downward pressure.

China’s consumer price index or CPI in November rose 4.5% YoY. Among them, the CPI of cities rose 4.2%, while rural areas rose 5.5%.

Food prices rose 19.1% and non-food prices rose 1.0%. Lastly, consumer prices rose 6.5%, while service prices rose 1.2%. On average from January to November, the CPI rose by 2.8% over the same period last year.

In contrast to the significant rise in CPI, the industrial producer’s price index (PPI) is still trending downwards.

DOWNWARD PURCHASING PRICE

There is a 1.4% YoY fall in the November purchaser price nationwide while producer price has fallen by 2.2% YoY. On average from January to November, the purchaser price fell by 0.3% year-on-year, and the producer price fell by 0.7%.

What it means is the downward trend is a matter of great concern not only for China but also for the global market.

Anbound says the CPI increase means the CPI might exceed 5% in January next year because of the Chinese New Year.

“It is a matter that the relevant parties should take into consideration,” says the Think Tank.

ERA OF HIGH INFLATION

Anbound also says China may witness an era of high inflation and if inflation is encountered against the background of declining economic growth, China will technically fall into “stagflation”.

This means that an economic downturn and rising inflation will be a major issue for the Chinese economy.

As the downward pressure on the economy may directly lead to an increase in unemployment and a slowdown or even decrease in income growth.

It risks having a very real impact on the lives of ordinary people at the social level. Moreover, it will further reduce the consumer demand of the people and exacerbate the “winter” effect of the economy.

There is a sharp rise in food prices, tobacco and alcohol.

China’s economy is entering a state of “atypical stagflation” while at the same time showing increasing signs of recession.

In the background of all this, it’s likely that China’s economy in 2020 will start from a “severe winter” of sorts.