At a press conference on July 15, China’s National Bureau of Statistics announced that the Consumer Price Index (CPI), the key measure of inflation, was 2.3 percent in the second quarter. It was 2.1 percent for both April and May, and 2.5 percent for June. In the U.S., the CPI in June was 9.1 percent, reaching a 40-year high.

The South China Morning Post (SCMP) has reported on why China’s inflation rate has been relatively lower than that of the West. A major reason for China’s lower inflation rate is that the weight of products included in the CPI calculation is very different.

CPI tracks the prices people pay for a “basket” of goods and services. The list of goods is weighted, with those more often bought for daily consumption getting a higher weight.

While China puts more weight on food and clothing, the U.S. values housing and transportation more, the latter being more susceptible to global energy prices.

According to Huang Wentao, an analyst at the China Securities Finance Corporation (CSF), in China’s CPI calculation, the weight of food is about 18.4 percent, while that weight in the U.S. CPI is 7.8 percent; China’s weight for clothing and apparel is about 6.2 percent, while in the U.S. it is 2.8 percent. The rent for housing accounts for 16.2 percent in China’s CPI, and 32 percent in the U.S. calculation. Transportation accounts for 10.1 percent in China, which is much lower than the 15.1 percent in the U.S. counterpart.

Source: Central News Agency (Taiwan), July 15, 2022
https://www.cna.com.tw/news/acn/202207150277.aspx

Well-known Chinese news site NetEase (NASDAQ: NTES) recently reported that, the newly released official numbers showed Chinese GDP growth slowed to 0.4 percent in Q2. The economy grew at its slowest pace since it was first hit by the coronavirus outbreak two years ago, underscoring the impact on growth of the country’s strict measures to contain the pandemic. The GDP number is far below the 1.2 percent that economists had forecast. That means Beijing is likely to fall well short of its full-year growth target of around 5.5 percent. This will deliver another blow to a global economy battered by recession fears. However, China remains committed to its “dynamic zeroing” approach to eradicating COVID infections. With recent cases of the highly contagious BA.5 COVID variant in some cities, it appears more lock-downs are likely. To make matters worse, data has also shown no signs of improvement in the slump in investment in China’s real estate market, which has driven demand for goods and services that account for about 20 percent of China’s total GDP. It was reported very recently that households in dozens of cities have stopped paying their mortgages as property developers have failed to complete planned construction. The Chinese National Bureau of Statistics said, “The foundation for a sustained economic recovery is not solid.” Also, the Bureau warned of a “rising risk of stagflation” in the world economy. The Chinese stock market reacted flat to the GDP data. In the meantime, the heavy blow of Shanghai’s lockdown is also clearly seen in the data. The city’s economy contracted 13.7 percent year-over-year in the second quarter.

Source: NetEase, July 16, 2022
https://www.163.com/dy/article/HCAR8MPG0553GU6W.html