Inflation moderates in January

2022-02-17 08:32:14China Daily Editor : Li Yan ECNS App Download

A customer shops vegetables at a supermarket in Nanjing, East China's Jiangsu province, Feb. 16, 2022. (Photo/Xinhua)

China's economic growth will recover to over 5 percent in 2022 despite headwinds, as the government has pledged front-loaded policy support to shore up growth, experts said on Wednesday.

They anticipate more policy easing, such as reduction in the reserve requirement ratio, as well as increased infrastructure spending and further tax cuts, in a bid to promote stable and sound economic growth this year.

Their comments came as China's factory-gate inflation hit a six-month low and consumer price inflation slowed year-on-year in January, which leaves room for policymakers to further ease monetary policy to spur growth.

China's producer price index, which gauges factory-gate prices, rose 9.1 percent year-on-year in January, down from 10.3 percent in the previous month, the National Bureau of Statistics said on Wednesday.

Dong Lijuan, a senior statistician at the bureau, said growth in producer prices slowed as the prices of some commodities such as coal and steel fell last month, and consumer prices remained generally stable with the help of government measures to ensure market supplies of products vital to people's livelihoods.

China's consumer price index, a main gauge of inflation, rose 0.9 percent year-on-year in January, down from 1.5 percent in the previous month, according to the NBS.

Wen Bin, chief analyst at China Minsheng Bank, expected to see falls in factory-gate price inflation due to the high-base effect from the previous year, saying that overall inflation is expected to remain controllable, which means policymakers will feel less constrained to step up policy support on the monetary front.

Zhou Maohua, an analyst at China Everbright Bank, said falling factory-gate price inflation helps ease the pressure on raw material costs and boosts the profitability of midstream and downstream enterprises.

Considering the mild increase in consumer prices and slow growth of PPI, Zhou took an optimistic view of China's economic recovery this year, saying it will create a better environment for expanding domestic demand.

Luo Zhiheng, chief economist at Yuekai Securities, forecast China's GDP growth will reach around 5.2 percent this year, with consumption, manufacturing investment and new infrastructure investment serving as key driving forces.

Luo said that the second quarter may mark the low point of the year's economic performance, and GDP growth will then stabilize and rebound to higher levels in the third and fourth quarters.

To better stabilize the overall economy, Luo said the country needs to strictly implement COVID-19 prevention and control measures, increase cross-cyclical adjustments and enhance support for small and medium-sized enterprises and hard-hit sectors. More efforts will also be made to spur consumption and expand effective consumption in fields such as weak links, advanced manufacturing and infrastructure.

Luo's views were echoed by Cheng Shi, chief economist at Hong Kong-based ICBC International, who said the Chinese economy will gradually stabilize in the second half of 2022, and China's GDP growth may reach 5.1 percent for the whole year.

With consumption growing mildly due to slow job and wage growth, Iris Pang, chief China economist at Dutch bank ING, believes the engine of growth for 2022 has to be infrastructure investment. "I expect around 5.4 percent GDP growth, but this is based on my expectation that infrastructure investment would grow by around 10 percent."

With growth in core CPI staying unchanged in January, Wu Chaoming, chief economist at Chasing Securities, said this showcases the strong resilience of the Chinese economy.

In the short term, stabilizing growth, expanding demand and stabilizing expectations will be the priorities for China's economic policy, Wu said.

Looking ahead, Chen Chuanglian, deputy director of the Southern China Institute of Finance at Jinan University in Guangzhou, Guangdong province, said China still has room for macro policy support.

On the monetary front, Chen said the policy focus can shift from preventing risks to stabilizing growth, and expected the government to step up policy easing.

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