BEIJING: Deflation in China accelerated in November, official data showed on Saturday, underlining the difficulties the world’s second-largest economy faces in reviving slowing demand.

The figures came after President Xi Jinping said on Friday that the Asian giant’s post-pandemic recovery was “still at a critical stage” and warned of “increasing adverse factors in the international political and economic environment”.

The consumer price index, the main gauge of inflation, fell 0.5 per cent year-on-year, according to the National Bureau of Statistics (NBS).

NBS official Dong Lijuan said in a statement that the decline was linked to “downward fluctuations in the prices of energy and food”.

The corresponding figure for October was a decline of 0.2pc.

While deflation suggests goods were cheaper, it poses a threat to the broader economy as consumers tend to postpone purchases in the hopes of further reductions.

A lack of demand can then force companies to cut production, freeze hiring or lay off workers, while potentially also having to discount existing stocks – dampening profitability even as costs remain the same.

The NBS also said producer prices sank for the 14th consecutive month, sliding 3pc year-on-year compared to 2.6pc the previous month.

Dong attributed the decline to “a rebound in international oil prices which weakened demand for some industrial goods”.

China’s economy grew a modest 4.9pc in the third quarter, slightly below Beijing’s annual target of around 5pc, which is one of its lowest in years.

Xi urged measures to boost the economy at a meeting of the ruling Communist Party’s Politburo, state broadcaster CCTV reported Friday.

“It is necessary to focus on accelerating the construction of a modern industrial system, expand domestic demand, (and) prevent and defuse risks,” he said.

Published in Dawn, December 10th, 2023

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