China 2012 CPI projected at 2.9%

A senior figure with HSBC has predicted that China’s consumer inflation will ease to 2.9 percent for 2012, giving sufficient room to decision makers to roll out pro-growth measures.

China’s consumer price index, the main gauge of inflation, may retreat further to under 3 percent in June with both prices of food, particularly pork, and non-food items falling, said Qu Hongbin, chief economist at HSBC China and co-head of Asian economic research at HSBC, in a research note issued on Sunday.

Compared to April’s 3.4 percent and March’s 3.6 percent, the CPI eased further to a 17-month low of 3 percent in May due to falling food prices and base effect.

High food prices pushed China’s CPI up 5.4 percent year on year in 2011, far above the government target of 4 percent. High inflation limited the Chinese government’s options to boost growth when the economy cooled last year.

China has unveiled a spate of easing measures since 2011 to spur growth as the annual growth pace of gross domestic product (GDP) slowed to 8.1 percent in the first quarter of 2012 from 9.2 percent in 2011.

The central bank has cut the reserve requirement ratio three times since late last year and lowered benchmark interest rates for the first time in four years on June 7.

The economy has stabilized, but demand was still weak and May’s economic data showed the GDP grew at a rate lower than the 2012 government target of 7.5 percent, the research note said.

HSBC expected the Chinese central bank to cut the reserve requirement ratio four times and lower the interest rate once in the rest of the year to spur growth.

Also with tax cuts, increased spending on public infrastructures and measures to support the private sector, China’s GDP is likely to rebound to 8.5 percent in the second half, according to Qu.


Leave a Reply