The trend of Chinese inflation in December creates room for maneuver for a cut in interest rates on medium-term loans that the Central Bank could decide as early as next week. Beijing would thus further increase the distance from the policies adopted in the rest of the world. In fact, the November script is back, with producer prices down by 1.2% and up by 10.3% annually. Data that is not downloaded to consumer prices which, on the other hand, record an increase on an annual basis of 1.5%, less than the expected + 1.8%. In November, the rise was 2.3%. On a monthly basis, inflation fell by 0.3%, with foodstuffs at -1.2% (+ 1.6% in November).
More margins for the central bank
Inflation in China therefore rises at a slower pace than expected. Paradoxically, a brake came from the restrictions decided against the Covid-19 outbreaks and the risks associated with the Delta and Omicron variants, in addition to the decline in the prices of some raw materials led by the central government.
But the decision of the Central Bank, which has already cut ratios and prime rates at the end of 2021, will not be able to counteract the decline of the local economy for long.
The process that will lead to the definition at national level of the GDP expected for 2022 on the occasion of the last speech to the Nation by Premier Li Keqiang to Parliament in joint session in March has started last week.
Each province defines its GDP and the round at the local level is far from optimistic about the opportunities to be able to guarantee a positive forecast for all of China.
The individual areas of the country are proceeding to identify their own assessment with respect to the potential of next year and none, so far, has declared a percentage above 6% which, however, will hardly be insured this year.
The fate of the Olympics
Furthermore, the winter Olympics is upon us, the event opens its doors on February 4th and, as usual, it is an event that has a very strong political value for the Chinese nomenklatura.