2023-12-09 17:40:00
After consumer prices already falling year-on-year in October, Beijing announced a further significant fall this Saturday. Figures which come in a still gloomy period for Beijing.
China still cannot emerge from its economic crisis. This Saturday, December 9, the State Bureau of Statistics (BES) indicates that the consumer price index (CPI) fell by 0.5% in November compared to the previous year. This is the lowest drop since November 2020, a consequence of the drastic confinement imposed by Beijing. This deflation, for the second consecutive month, is even stronger than what Bloomberg or Archyde.com analysts predicted.
For Xu Tianchen, senior economist at the Economist Intelligence Unit, cited by Archyde.com, this deflation is explained in particular by the fall in energy prices and a cyclical glut of supply, in addition to food prices. He predicts: “Downward pressure will continue to mount in 2024 as developers and local governments continue to deleverage and global growth slows.”
Inflation, excluding the price of food and fuel products, stood at 0.6%. But the producer price index fell 3.0% year-on-year compared to a 2.6% drop in October, marking the fourteenth consecutive month of decline and the fastest since August. Among the sectors which are not experiencing the crisis, the automobile sector, with car sales increasing by 25.5% year-on-year last month, following an increase of 9.9% in October. An even more pronounced boom for electric vehicles (+39.8%), engines which represent 40% of total car sales, compared to 20% in Europe.
Real estate crisis
Negative economic indicators, on the other hand, forced the Moody’s agency to issue a downward warning on Tuesday on China’s credit rating while Bloomberg Economics estimates that deflationary risks will persist in 2024. The Chinese central bank, however, sought to minimize deflation risks, with an adviser to the People’s Bank of China saying in November that these pressures were just “temporary.”
The BES’ deflation announcement came a day following the Politburo said China would do everything to boost domestic demand and improve economic recovery in 2024. But President Xi Jinping said Wednesday that the recovery The country’s economy was still at a critical stage, according to the country’s Xinhua news agency.
This year, the signals have almost all turned red, first and foremost the real estate sector, which alone represents, according to estimates, between 14% and 30% of China’s GDP. And if China’s exports rebounded in November following six months of contraction, its imports experienced a further decline. This relapse is all the more worrying as the comparison is made with November 2022, when health restrictions were a brake on activity and trade.
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