China’s National Bureau of Statistics will today release its monthly inflation figures for March. A steep increase in food prices
China’s National Bureau of Statistics will today release its monthly inflation figures for March.
A steep increase in food prices caused the value of the renminbi to drop precipitously over the last few months. A wave of African Swine Fever swept through Chinese pig farms, devastating pork production and spending prices for the meat staple spiralling upwards. The inflation rate rose throughout late 2019, reaching a peak at 5.4% in January 2020, a level not seen since 2011. However, in February inflation slowed to a rate of 5.2%. With the COVID-19 pandemic quashing consumer demand, it is likely that the report will show a fall in the inflation rate.
Due to this deflationary trend, the People’s Bank of China is unlikely to adopt a quantitative easing programme similar to that of the US Federal Reserve. Officials fear exacerbating an already significant national debt. The same concern prevented the government from implementing a massive fiscal stimulus. Instead, the central bank is likely to open up access to credit for small firms and lower interest rates through a variety of financial instruments. Thus, expect the central bank to introduce a moderate measure of liquidity to the faltering Chinese economy. But it is unclear if these half-measures will be enough to keep it afloat.
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