China’s CPI fell to 4.2% in November – lowest reading since September 2010

China’s consumer pricing index (CPI) eased to 4.2% in November from 5.5% in October, according to the National Bureau of Statistics.  The CPI hit a three-year high of 6.5% in July this year and has been gradually weakening since then.   The November’s lower than expected inflation rate was marked a 13-month low.  Taking the first 11 months together, the CPI rose 5.5% year-on-year in January-November, well above the government's full-year inflation control target of 4%.

Inflation has dampened consumer confidence.  More importantly, it has become a social issue as many ordinary citizens become angry and frustrated, which may, in the opinion of the central government, threaten the main theme of “a harmonious society.”  Throughout this year the government has set as the top priority bringing prices under control.  However, it is a tricky balance – the government needs to battle inflation, yet ensure growth holds up given all the global uncertainties.  Last week, the central bank cut the reserve requirements for the first time in nearly three years, in an attempt to stimulate its economy.  The move, accordingly to many analysts, indicates that the government has again put economic growth at the top of its agenda, rather than concerns about inflation. 

Posted by: Pei Zhang

Categories: China Desk