China’s Consumer Inflation Eases in March: Implications for the Economy and Policy Support

China's consumer inflation eased in March despite a pick-up in economic activity, with the consumer price index (CPI) rising by 0.7% from a year earlier, down from 1% growth in February, according to the National Bureau of Statistics.[0] This was below expectations, with CPI having been expected to rise by 1% last month, according to Chinese financial data provider Wind.[1] Meanwhile, the producer price index (PPI) contracted further, reflecting the impact of a slump in oil prices last month and a high comparison base with a year ago, when energy costs spiked after the war in Ukraine began.[1] Household sentiment for income and jobs has remained below pre-pandemic levels, exports are falling, and uncertainties are rife in the property market despite some improvement. The figures indicate that domestic demand remains weak, giving authorities space to roll out more supportive policies to make the consumption-led rebound more sustainable.[2]

Last month, the PBOC unexpectedly decreased the required cash reserve amount for banks, resulting in more cash available for lenders to distribute as loans.[2] This move signals that the central bank is willing to ease monetary policy as needed to aid the recovery.[2] While the economy has been recovering post-Covid, the figures indicate that there is still a long way to go.[2] CPI has remained well below a government-set target of around 3% for the year, and Beijing has set a target of around 3% growth for 2023.[1]

The deepening of industrial deflation further underscores the need for the central bank to ease monetary policy to aid the recovery. The impact of a slump in oil prices last month and a high comparison base with a year ago, when energy costs spiked after the war in Ukraine began, have contributed to the contraction.[2] However, the figures also indicate that the recovery is not yet on solid ground, and more supportive policies will be necessary to make it sustainable.

Despite some improvement in the property market, uncertainties remain, and household sentiment for income and jobs is still below pre-pandemic levels. Additionally, exports are falling, and this has contributed to the weak domestic demand.[2] The figures indicate that more needs to be done to support the economy and ensure that the recovery is sustainable. The PBOC's move to lower the amount of cash banks must keep in reserve is a step in the right direction, but more supportive policies may be necessary to ensure that the recovery gains momentum.

0. “China CPI inflation eases further in March, PPI shrinks By”, 11 Apr. 2023,

1. “China inflation: consumer prices eased in March, producer prices remained in deflation” Forex Factory, 11 Apr. 2023,

2. “China's Consumer Inflation Slows, Producer Prices Fall Further” Windsor Star, 11 Apr. 2023,

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