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China’s consumer prices edged higher in March against a year earlier, missing analysts’ forecasts and underlining the challenges for the world’s second-largest economy as it tries to boost domestic demand.
China’s President Xi Jinping is trying to move the economy away from its debt-stricken real estate sector towards high-end manufacturing in a delicate transition that is leading to tensions with the US and Europe.
The country’s consumer price index was 0.1 per cent higher year on year in March, according to official statistics released on Thursday, lower than 0.7 per cent in February and below the 0.4 per cent forecast by a Reuters poll of analysts.
The soft CPI number comes as China’s economy has shown mixed signs of recovery in the first quarter of the year, with factory activity expanding for the first time in six months in March.
But the National Bureau of Statistics said on Thursday that the producer prices index declined 2.8 per cent compared with 2.7 per cent in February, as deflationary pressures continued to stalk the manufacturing sector.
The Communist party set a growth target of 5 per cent for 2024, the same as last year, at the March meeting of China’s rubber-stamp parliament — a goal analysts said was ambitious and would require increased stimulus support.
Fitch Ratings cut its outlook on China’s long-term credit rating to negative on Wednesday, citing uncertain prospects for the economy as the country moves from its property-led growth model.
Fitch said the outlook reflected China’s increasingly wide fiscal deficits and rising government debt as Beijing seeks a more sustainable growth model.
Analysts said CPI during the January and February period was boosted by the Lunar New Year holiday.
In March, food prices fell 2.7 per cent while non-food prices rose 0.7 per cent.
Goldman Sachs said this week it was revising up its first-quarter gross domestic product forecast for China to 5 per cent year on year from 4.5 per cent because of the stronger manufacturing sector.
It said growth would probably hit the government’s target this year but cautioned that the economy would weaken next year as China’s focus on export growth lost momentum because of its “already elevated global market share and trading partners’ pushback”.
US treasury secretary Janet Yellen concluded a visit to China this week with warnings that Washington would protect its industries from dumping of cheap exports and urged Beijing to do more to boost domestic demand.
German Chancellor Olaf Scholz is also due to visit China this week. He is expected to call for greater access to the Chinese market for foreign firms. The European Union is launching multiple probes into Chinese exports that it suspects of receiving heavy state subsidies, including electric vehicles.
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