It’s that time of the month again, when we get out our trowels and start poking around the monthly figures. This time, we’ve found in November’s data the first indication of China moving out of a ten-month period of falling consumer prices. The National Bureau of Statistics (NBS) announced a 0.6% year-on-year rise in last month’s consumer price index (CPI), edged up by higher food and fuel prices.
Inflationary pressures have long been in the cards as economic growth trundles uphill while the government fiddles with resource prices. The National Development and Reform Commission, the country’s top economic planner, recently raised the price of gasoline by 7% and diesel by 8%. Non-residential utility rates have also been on the rise.
China has come under a lot of stick from abroad, as some trading nations contend that lower raw material and input prices are basically a form of subsidy. The criticisms aren’t baseless, but neither are they entirely fair: Beijing has been trying, with some interruptions, to implement a more "liberalized" pricing mechanism.
Cheap inputs or not, when bricks and mortar are put together, there’s always a profit to be made. The NBS said that November property prices were up 5.7% year-on-year against 3.9% in October. Real estate investment grew 17.8% to a massive US$458 billion for the January-November period. With residential housing accounting for 13% of the CPI basket, it will be interesting to see how much further prices will go before the government throws a bucket of cold water over the market.
But that may be some time away yet. Industrial production grew 19.2% year-on-year against October’s 16.1%, bolstered by coal, power, steel and autos, and economists believe that there is more room for growth.
Exports continue to recover while domestic investment in public projects, strong consumer demand and robust fixed asset investment – of which property accounts for about 25% – point to good times lasting a while longer.
However, increasing inflationary pressures may mean that the government drops its program of using more market-based structures in energy or resource pricing. So be it: Maintaining strong economic growth, promoting urbanization and reducing income gaps will be among the key policy drivers next year. Beijing can listen to whining about price liberalization another time.