The National Bureau of Statistics (NBS) announced that China’s consumer price index (CPI) rose the fastest in three months, climbing 2.1% from a year earlier in January, which is higher than the 1.8% annual rise in December. China’s consumer inflation accelerated in January, mainly driven by the Spring Festival holiday effect, pointing to a gradual recovery of domestic demand amid signs of a steady economic rebound, analysts said. Despite facing inflationary pressures amid the robust recovery of domestic demand and high prices of energy and raw materials, they said they believe China will keep prices stable within a reasonable range this year, given its sufficient supply of daily necessities and the government’s effective measures to maintain price stability. The Producer Price Index (PPI), which gauges factory-gate prices, was down 0.8% in January from a year earlier, showing an annual decline for the fourth month in a row.
Lu Ting, Chief China Economist at Nomura, said the growth in CPI inflation was mainly driven by the Spring Festival holiday falling in January this year compared to February last year, and the decline in the PPI was driven by falling global energy prices. “Looking forward, we expect inflation to edge down marginally to 2% in February,” Lu said. Nomura recently raised its 2023 China GDP growth forecast from 4.8% to 5.3% and the 2023 CPI inflation forecast from 2.5% to 2.6%. “We still believe inflation is not a major concern in China this year, and we expect monetary policy to remain accommodative in 2023,” Lu said.
This year, China will seek to keep overall prices stable within a reasonable range, given the sufficient supplies of grain and oil, expanding acreage of vegetable farms, effective measures to use pork reserves to steady prices, and the solid foundation for ensuring stable prices of essential commodities, said Zhang Xuewu, Director of the Price Analysis and Forecasting Division at the Price Monitoring Center, which is part of the National Development and Reform Commission (NDRC). Zhou Maohua, Macroeconomic Analyst at China Everbright Bank, said he expects China’s CPI will continue to rise mildly with the gradual recovery of economic activity, while the PPI may continue to decline in the following months due to slowing global demand and the high comparison base of the previous year. China’s broad money supply (M2) rose 12.6% year-on-year in January to CNY273.81 trillion, higher than the 11.8% in December, according to the People’s Bank of China (PBOC).
China’s outbound direct investment (ODI) rose 5.2% year-on-year to CNY985.37 billion in 2022, according to the Ministry of Commerce (MOFCOM). Apart from benefiting from the tangible growth of the Belt and Road Initiative (BRI) and the Regional Comprehensive Economic Partnership (RCEP) agreement, experts said the growth of China’s ODI last year was mainly driven by domestic companies’ improved ODI structure. China’s ODI in wholesale and retail sectors soared 19.5% on a yearly basis to USD21.1 billion last year, while investment in manufacturing, and leasing and business services went up 17.4% and 5.8% year-on-year, respectively. China’s optimized Covid-19 control policies and eased travel restrictions will not only encourage its exporters to travel abroad to win more orders, but also increase Chinese companies’ merger and acquisition activities in overseas markets this year, especially in developed ones, as well as in BRI and RCEP-related markets, said Wang Xiaohong, Deputy Director of the Information Department of the Beijing-based China Center for International Economic Exchanges, the China Daily reports.
