Low Base Effect Resulted in Rising CPI and Growth to Remain Mild

Economic Research	09 November 2016
China
Economic Highlights
Low Base Effect Resulted in Rising CPI and Growth to Remain Mild China’s CPI growth was in line with our estimation in Oct 2016, while PPI growth again beat market expectation on the upside driven by rapid rising commodity price and lowered comparable base. Looking ahead, low base effect will continuously support China’s CPI in the near term. In the medium term, we see more upside risks coming from non-food items, given rising rental price, growing fuel cost and pick-up of service inflation. But the overall increase in CPI will remain mild amid sluggish economic recovery. In the meantime, PPI growth is likely to gain further in the coming months, on the back of high commodity prices and low base effect. Policy wise, the central bank will stay with its prudent stance and will not take any aggressive move even when liquidity conditions become tight. PBoC will stick to open market operations and MLFs to adjust liquidity levels. Economist:  Zhang Fan| +8621 6288 9611 ext 105
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