Consumer inflation in China has gone up at the fastest pace in almost six years. Pork prices have soared nearly 70 per cent owing to African swine fever in September.
Authorities have gone as far as tapping the nation's pork reserve to control prices of the staple meat, as the swine fever crisis could become a political and economic liability for the state.
This certainly contrasts with the picture Xi Jinping aimed to paint on the nation's annual parade celebrating 70 years of the People's Republic of China with a huge display by the People's Liberation Army. “There is no force that can shake the foundation of this great nation,” he said at the speech commemorating the occasion. Some 580 pieces of military equipment, including drones and missiles, were unveiled at the parade.
The consumer price index (CPI)— a key gauge of retail inflation — hit 3.0 per cent last month, the National Bureau of Statistics (NBS) said, up from 2.8 per cent in August and the highest since November 2013.
The rise was caused by food price inflation, particularly disruptions to pork supply, Capital Economics said.
China and the US, since October 10 had been taking steps to reach a truce of sorts in the trade war the two nations have been involved in. Trump had met Chinese Vice-premier Liu He and said things were going well. One of the takeaways from phase one of the talks is that China will purchase between $40 billion and $50 billion in US agricultural products. He delivered a letter from Xi which said, he hoped that both the nations could meet halfway in resolving economic tension. Trump called the letter beautiful.
It could also mean a possibility of the US staving off higher tariffs on $250bn of Chinese goods and rolling back some other US levies. Trump also indicated that it is possible that he and Xi could meet more than once before increased tariffs on US imports could kick-in on March 1. There certainly has been some progress in the right direction post talks between the two trade giants and markets were up in a response to them on Monday.
Both nations have so far agreed to changes in areas of intellectual property rights, currency exchange rates, financial services, expansion of trade and technology transfers.
It looks like the Chinese economy might still need a boost when it comes to getting prices of basic commodities back on track.
Increase in price of pork has also pushed up prices of other meats including beef, chicken and duck and eggs by up to 19 per cent as consumers switched to other sources of protein.
"Looking ahead, consumer price inflation should continue to accelerate in the coming months as supply disruptions continue to push up pork prices and as the drag from lower oil prices eases," said Martin Lynge Rasmussen from Capital Economics.
Producer prices, however, continued to slide for the fifth straight month, hit by weakening demand and mounting trade tensions with the US.
According to NBS, the producer price index (PPI) contracted 1.2 per cent in September from the previous year.
A slowdown in factory gate inflation reflects sluggish demand, while a turn to deflation could dent corporate profits and drag on the world's number two economy.
This, in turn, could lead to a drop in prices globally.
According to an IMF estimate, as of 2018, China’s government debt as a proportion of gross domestic product (GDP) was 72.7% and its government fiscal deficit was 11.2% of GDP. IMF sees the budget deficit ratio rising to 12.7% in 2019, dropping to 12.2% in 2020. China aims to expand its economy between 6% and 6.5%. But Prime Minister Li Keqiang said that even 6 per cent has not been easy to achieve. According to an analyst, the uncertainty in the economy has certainly been caused by the trade stand-off the country has had with the US.
