China remains at threat of deflation

Consumer prices were flat in September, while China factory gate prices saw annual declines slow for a third month, pointing to the uneven post-Covid recovery that may require further policy support. The consumer price index came in below the median estimate for a 0.2% increase. It inched up 0.1% in August for the first year-on-year increase in three months. Core inflation - excluding energy and food prices - however, climbed 0.8% in September from a year earlier, the bureau said in a separate statement. This rate of increase was similar to the one recorded in August. The producer price index fell for a 12th straight month, by 2.5% from a year earlier.

Economists had predicted a 2.4% fall in September. In other data China's exports and imports shrank at a slower pace for a second month in September. Outbound shipments in September declined 6.2% from a year ago, following a drop of 8.8% in August, and beating economists' forecasts for a 7.6% fall. Imports also fell by 6.2%, less than the 7.3% decline recorded the previous month. That resulted in a broader trade surplus of $77.71 billion in September

(AI Video Transcript)

The Chinese economy

China is currently facing a problem called deflation, which means that prices for goods and services are not increasing, and in some cases, are even going down. This is happening because of the COVID-19 pandemic, which has caused the Chinese economy to have an inconsistent recovery. In order to help the economy, the government may need to provide more support.

The Chinese consumer price index

When we talk about prices, there are two important measures to consider. The first one is called the consumer price index, which looks at the prices of things that people buy. In September, this index showed that prices went down by 0.2 percent compared to the same time last year. But in August, they actually went up by 0.1 percent. The second measure is called the producer price index, which looks at the prices of things that are made in factories. In September, this index showed that prices went down by 2.5 percent, which was more than experts predicted.

Chinese imports and exports

While the Chinese economy is showing signs of getting better, the new data tells us that there is still a risk of prices going down. There is also news about trade, which means the buying and selling of goods between countries. In September, China sold 6.2 percent fewer goods to other countries compared to last year, which was better than expected. China also bought 6.2 percent fewer goods from other countries, which was also better than before. This means that China had a bigger trade surplus, which is when a country sells more than it buys.

The Yuan

Another important thing to know is that the CNY is doing well against the US dollar. The Hong Kong stock exchange is also being watched closely. Right now, the USD is not worth as much compared to the yuan, which is good for China. The yuan has been trading within a specific range, and it is at its highest point for this month. The Hong Kong stock index has been going down, but not as much as before.