China Focus: Consumer inflation picks up, producer deflation stays stubborn

BEIJING, July 9 (Xinhua) — China’s consumer inflation ticked slightly higher in June while at wholesale level, deflation remained a problem for a 40th month in a row, official data showed on Thursday.
China’s consumer price index (CPI), a main gauge of inflation, edged up 1.4 percent in June, slightly above market forecasts of 1.3 percent and a 1.2-percent rise in May, according to the National Bureau of Statistics (NBS).
On a monthly basis, consumer prices in June remained unchanged, compared with a dip of 0.2 percent posted in May.
NBS statistician Yu Qiumei attributed the pick-up to a lower comparative base from June last year and higher prices of food, including vegetables and pork.
For the first half of the year, CPI edged up 1.3 percent year on year.
Minsheng Securities forecast that China’s CPI growth will continue accelerate in the second half, to around 2 percent in the last quarter, but remain under the government’s annual target of 3 percent set for the year.
The producer price index (PPI), a measure of costs for goods at the factory gate, fell 4.8 percent year on year in June, widening from the 4.6-percent drop seen a month earlier.
The reading also marked the 40th straight month of decline.
“This showed industrial demand is worsening, and China continues to face prominent deflationary risks,” noted Qu Hongbin, chief China economist at HSBC.
Wen Bin, chief researcher with China Minsheng Bank, said the data pointed to continuously weak domestic demand in the economy, adding there is still room for the central bank to ease its monetary policy.
China’s economy grew at its lowest rate in six years in the first quarter, expanding 7 percent, weighed down by a housing market downturn, weak domestic and external demand and overcapacity.
To bolster growth, the Chinese government has unveiled measures including four interest rate cuts since November, accelerated fiscal spending and industrial reforms.
However, analysts predict growth will slip further in the second quarter to below 7 percent as the impact of these pro-growth measures has yet to spread. Second-quarter GDP data is due on July 15.
Given the weak growth, Qu predicted an interest rate cut by 25 basis points and 100-basis-point reductions in banks’ reserve requirement ratio in the third quarter.
Recent stock market volatility has cast a further shadow on the world’s second-largest economy, with its key Shanghai index shedding nearly one third since a June peak.
A batch of supportive policies has been rolled out in the past week to revive investor confidence, including asking 21 major securities brokers to spend 128 billion yuan (about 21 billion U.S. dollars) on exchange traded funds that track the performance of blue chip stocks.
The benchmark Shanghai Composite Index opened 2.13 percent lower on Thursday, but turned positive to close the morning trading session by rising 1.3 percent. The market staged a strong rally minutes after the afternoon trade started.
As of 13:30, the benchmark Shanghai Composite Index surged nearly 5 percent while the Shenzhen Component Index gained 4 percent. Enditem

 

China Focus: E-commerce behind new wave of consumption in China

BEIJING, July 14 (Xinhua) — When Jia Hailan wants to buy something, she reaches for her phone almost as much as she opens her wallet.
The Beijing twentysomething buys food and clothing for her cat via her mobile phone and orders lunches through apps that track nearby eateries with delivery services. She hails taxis through cab-hailing apps when she goes out, and much of her home possessions were purchased online, including an electronic scale she uses to track her weight every morning.
Young Chinese born in the 1990s are a generation of online consumers, and older generations are catching on as well. By late 2014, the country had 360 million online shoppers, accounting for almost a quarter of the nation’s population.
In the first five months of 2015, online retail sales value in China grew 40 percent year on year, four times the growth for general retail sales value for consumer goods during the same period.
The trend is expected to continue as the number of Chinese Internet users grows. The country’s online population reached 649 million by the end of 2014, with some 557 million accessing the Internet via mobile phones.
“The Internet has brought three irreversible changes to China’s social consumption: online shopping is reaching everyone after becoming popular with young people, desktop shopping is being rapidly overtaken by mobile-based shopping, and buying based on what other people are buying has given way to personalized consumption,” said Shang Yan, online marketing director of womai.com, an online food retailer.
“These changes are certain to deeply transform Chinese people’s consumption style,” Shang said.
The online shopping boom is helping lift consumption’s role in the Chinese economy, which once relied too heavily on exports and investment.
The National Bureau of Statistics said consumption contributed 51.2 percent to China’s economic growth last year, beating contributions by exports and investment, which cooled due to uneven global demand and a downturn in the domestic property market.
A McKinsey report from 2013 said China’s online consumption has not simply replaced consumption that would have taken place offline. For each dollar of online consumption, around 40 cents were from incremental — or new — consumption, it said.
The report predicted that by 2020, China’s “e-tailing” market could generate up to 650 billion U.S. dollars in sales, equal to the 2013 e-commerce sales value of the United States, Japan, the UK, Germany and France combined.
Experts said the Internet is making consumption easier due to free flow of information between sellers and buyers. “It is just open information on the Internet that is making new consumption possible,” said Zhang Jindong, founder of top Chinese retailer Suning, a leader in home appliances.
Brick-and-mortar stores are also feeling pressure to adopt new business models to retain customers.
Shenzhen-headquartered Rainbow, a department store chain with 58 flagship stores across the country, has rolled out its own online sales service and promoted discounts and new product information through instant messaging service WeChat.
“By analyzing customers’ online shopping data, we will be able to refine and deliver our product promotions directly to users’ phones,” said Tan Xiaohua, deputy general manager of Rainbow’s e-commerce department.
In addition to boosting consumption, the government is exploring other ways the Internet can bolster the economy and employment.
It unveiled an “Internet Plus” action plan on July 4 to integrate the Internet with sectors such as modern manufacturing, agriculture, energy, finance, public services, logistics, traffic and e-commerce.  Enditem

Source Xinhua