Market News International:

Why has the upturn in China's economic data since the end of September not led to a stronger increase in CPI, with CPI in November remaining relatively weak? And what is the outlook for CPI? Thank you.

Fu Linghui:

Thank you for your questions. Commodity pricing is an important aspect to observing the relationship between supply and demand. For China, food has a large weight in the CPI and greatly impacts its fluctuation. When observing the relationship between supply and demand, we should not only look at the overall changes in CPI, but also changes in the core CPI. Judging from the situation in November, mainly affected by the decline in food prices, the month-on-month decline in consumer prices widened while the year-on-year growth rate declined. However, if we look at the core CPI, the year-on-year growth rate continued to expand, indicating an improvement in the relationship between supply and demand. This also shows that price changes should be observed from multiple perspectives.

From a month-on-month perspective, CPI fell by 0.6% in November, 0.3 percentage point wider than the previous month. This was mainly due to relatively high temperatures and relatively few cold fronts across the country in November, which was conducive to the production, storage and transportation of fresh food, thereby driving the decline in food prices and lowering consumer prices. In November, food prices fell by 2.7% month-on-month, a decline 1.5 percentage points higher than that in the previous month. The prices of fresh vegetables, pork, fresh fruits and aquatic products dropped within the range of 13.2% and 1.3%, jointly contributing to a month-on-month decline in CPI of about 0.46 percentage point, accounting for about 80% of the total CPI decline.

CPI rose by 0.2% year-on-year in November, eased from the 0.3% increase reported in the previous month. The decrease in food prices was the main factor behind the decline in year-on-year price increases. In November, food prices rose by 1%, down 1.9 percentage points from the previous month. Price increases with fresh vegetables and pork were both lower than the previous month, and the price of fresh fruits turned from an increase in the previous month to a decrease.

In terms of price changes, the yearly increase of CPI continued to narrow in recent months, mainly due to fluctuations in food and energy prices. Prices of other products and services were generally stable. As existing and incremental policies took combined effects, the supply and demand relationship showed signs of improvement. In November, the core CPI rose 0.3% year on year, 0.1 percentage point higher than the previous month, marking expanded growth in two consecutive months. Meanwhile, the increase of prices in certain service sectors went up. Service prices in November rose 0.4% year on year. Among this, the price of education, culture and recreation rose 1%, 0.2 percentage point higher than the previous month.

The CPI was generally stable in November. Driven by improved demand, the supply and demand relationship showed signs of improvement. Certain sectors saw slight price increases. Going forward, China will see another bumper harvest, supply of most industrial consumables will be adequate, and supply of services will be generally stable. The economic recovery will drive up demand, which is conducive to improving the CPI, so the CPI is expected to maintain a slight increase. Thank you.