China PPI's Decline Slowed in July on Capacity, Restructuring Reforms, Experts Say
Yicai Global
/SOURCE : Yicai
China PPI's Decline Slowed in July on Capacity, Restructuring Reforms, Experts Say

(Yicai Global) Aug. 10 -- China's producer price index, which measures inflation at wholesale level, was down 0.9 percent year-on-year in July, marking the 29th month in a row that the index has fallen. The rate of decrease has slowed, though, reflecting the successful implementation of reform initiatives, experts say.

The pace of decline has narrowed from a drop of 2.3 percent in March, 2 percent in April, 1.4 percent in May and 1.1 percent in June, according to Xinhua News. This indicates that initiatives such as cutting capacity, restructuring and industrial transformation are taking effect, Mr. Hu Chi, a researcher at the State-owned Assets Supervision and Administration Commission of the State Council, told Yicai Global. Ineffective supply has been reduced and demand has been rising. Moreover, large projects such as high-speed railroads have stimulated demand for iron and steel.

The PPI performed better than expected in July, Mr. Liu Zhe, assistant to the director of the Wanb Institute, said. The slow pace of decrease can be attributed to a rise in the price of productionand indicates the industrial economy is being stabilized.

The slowing decline in the PPI is an encouraging reflection of the shift of the market toward supply side reform and the successful implementation of major reform initiatives, Mr. Lu Zhengwei, chief economist with the Industrial and Commercial Bank of China, pointed out.

China's consumer price index rose by 0.2 percent in July month-on-month, up 1.8 percent year-on-year. The modest rise reflects a stable level of consumption, Mr. Liu said.

A growth rate of 1.8 percent is a reasonable level in the context of global deflation, Mr. Lu said. A level below 1 percent will result in deflation, while one above 3 percent will bring about inflation. It is likely that the CPI will be kept below 2 percent over the next several months.

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