(Yicai Global) May 15 -- The consumer price indexes of seven provincial administrative areas of China, including Shanghai and Liaoning and Anhui provinces, fell into negative territory last month, according to data released by 31 Chinese provinces and cities, indicating a lack of consumer demand.

The previous CPI decline happened in Tibet Autonomous Region in February 2022, with a yearly slide of 0.2 percent.

Shanghai’s CPI fell 1.1 percent on a yearly basis in April, the steepest fall among the country’s 31 provincial units, versus a year-on-year CPI rise of 0.9 percent in March. Northeastern Jilin province saw a 1 percent drop in CPI last month. CPI growth in the 31 provincial units dropped overall from the previous month.

China’s CPI inched up only 0.1 percent last month from a year earlier, falling 0.6 percentage points from the previous month and hitting a new low since March 2021, the National Bureau of Statistics said on May 11. Core CPI, excluding food and energy prices, edged up 0.7 percent from the same period last year.

Year-on-year CPI growth slid last month mainly due to a fast decline in vegetable prices, lower international crude oil prices, as well as the impact of the auto price war, noted Wang Qing, chief macroeconomic analyst at Golden Credit Rating.

Strong compensatory travel demand boosted service prices, which became the main support for month-on-month growth in the core CPI, according to Wen Bin, chief economist at China Minsheng Bank. Most of the other prices weakened, he said.

The recent CPI and producer price index figures continued to fall on a yearly basis, triggering market debate and concern over deflation. The Chinese economy has not encountered deflation, and it will not happen in the next stage, NBS spokesperson Fu Linghui told a press conference last month.

Annual CPI growth slowed significantly, mainly because of a large base in the same period last year, said Dong Lijuan, a senior statistician at the NBS’s city department. The CPI climbed 2.1 percent on a yearly basis in April 2022.

Driven by factors including demand, supply, and liquidity, as well as the gradual easing of large-base effects in the third quarter, yearly CPI growth is expected to pick up in the third quarter and gradually return to a reasonable level, Pang Ming, chief economist at US real estate services provider Jones Lang LaSalle’s China business, told Yicai Global.

Recent financial data also showed a lack of demand. Household sector loans last month dropped CNY241.1 billion (USD34.7 billion) from March, of which short-term loans fell CNY125.5 billion and medium- and long-term loans fell CNY115.6 billion.

Both short-term loans and medium- and long-term loans declined, indicating that consumer confidence and the willingness to buy homes need to be further strengthened.

The main contradiction in China’s economy is the lack of aggregate demand, market players generally believe.

The National Development and Reform Commission is stepping up research and drafting policy documents on restoring and expanding consumption, and formulating targeted initiatives surrounding key areas, including stabilizing bulk consumption and expanding rural consumption, to promote steady consumption growth, the nation’s top economic planner revealed recently.

Editor: Peter Thomas