Low CPI rise does not signal deflation

The National Bureau of Statistics released the consumer price index for October on Tuesday, which was up 0.5 percent on the figure last year.
This is the first time in 42 months that the rise in the CPI has been below 1 percent. Further, considering present price trends, the figure might remain below 1 percent in November and December. Thus some worry whether the national economy is experiencing deflation.

That worry is unnecessary. First, the base figure for the CPI rise in the same period last year was relatively high at 3.8 percent, which naturally had a significant impact on the CPI increase in the same period this year. Second, pork prices fell sharply by 2.8 percent in October, which created better conditions for a fall in the CPI increase in October.

The country's generally successful control of the novel coronavirus has helped achieve this. As the market returned to normalcy, one local government after another introduced policies to encourage raising pigs, which in turn led to more supply of pork and the drop in prices.

The drop in the CPI rise does not mean the market has any problem, let alone deflation of the whole economy. Actually, even if the CPI rise remains below 1 percent for the coming few months, that does not mean deflation.

While the virus still rages overseas, the Chinese economy continues to perform well and all the major institutions, such as the International Monetary Fund, the World Bank, and many rating agencies, have predicted that China might be the only major economy that sees positive growth in the year 2020.

Of course, that does not mean we can relax. The global COVID-19 pandemic is still raging and the global economy still faces challenges. China needs to further expand its domestic market to leverage the "dual circulation" pattern.
As long as demand is sufficient, the normal operation of enterprises can be ensured and the country's economic fundamentals can be stabilized, and deflation will not occur.

- Beijing Youth Daily