Friday, June 9, 2023

Last month, in April, the prices of things increased only by 0.1% in China – it was lower than what people expected. Some experts think that deflation might become a problem and have asked the government to give money out to citizens as a way to make them buy more items.

Inflation Rate Plummets in China

China, the second largest economy in the world, has received news that its inflation rate is now lower than it was two years ago. According to the National Bureau of Statistics, China’s Consumer Price Index (CPI) grew by only 0.1%, much lower than the 0.7% from March.

In April, the prices of food and drinks dropped to less than a 1% increase over last year. The expected increase for this entire year was 3%, but it looks like that won’t happen. Core inflation, which doesn’t include food or drink costs, rose by 0.7% compared to last year.

Analysts have been concerned as the numbers show that China is struggling with its economic recovery since the coronavirus pandemic. However, Zou Lan from the PBOC believes that there’s no need to worry and that consumer demand would go up in the latter half of 2020.

5 Trillion Yuan Injection

Standard Chartered believes inflation won’t change very much in the coming months as prices have already jumped a lot in the first half of 2022. Nevertheless, even if inflation stays low, the bank thinks there will still be an increase in growth rate (more than 5%) without making any changes to interest rates which are currently set at 1%.

Experts are worried about the possibility of deflation and have proposed ideas to try and stop it. Li Daokui, a professor from Tsinghua University and former advisor for the bank in China, suggested that the government should give cash to citizens so they can buy things. He said that if 500 billion yuan was given away as vouchers, one trillion yuan worth of goods would be bought by citizens.

The Chinese government will get more than 300 billion yuan in taxes from the money given out to people. This will help with inflation rates in China and reduce worries about an economy that doesn’t have enough money. How do you feel about this? Tell us your thoughts in the comment section below!


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