Slow Economic Recovery in China Reflected in Slight Increase in Consumer Inflation

China’s consumer inflation edged higher in April while factory prices continued to slide, pointing to a continued rocky recovery in the world’s second-largest economy as Beijing battles lagging consumer demand and global trade tensions.

The national consumer price index rose 0.3 per cent year on year in April, official statistics showed on Saturday, ticking up from an 0.1 per cent rise in March, with price increases in areas including energy, education, and tourism offsetting falling food costs.

China’s economy had been beset by flat or falling consumer prices for almost a year, with the country’s 1.4 billion consumers widely opting to save instead of spend in the wake of the Covid-19 pandemic. But a third straight month of consumer inflation in April suggested some stabilization of domestic demand despite a years-long crisis in the important real estate market.

The inflation reading — better than the 0.2 per cent predicted by economists surveyed by Bloomberg — came as President Xi Jinping leans on a manufacturing revival, particularly in high-tech industries, to boost economic growth and offset the property sector slowdown.

The strategy has stoked growing fears among western leaders of cheap Chinese imports flooding their markets, especially as declining prices in the country’s manufacturing sector make Chinese goods cheaper.

Data released on Thursday showed the value of China’s exports in dollar terms rose 1.5 per cent year on year in April, but analysts said export growth in volume terms has been closer to 10 per cent or higher in recent months. The trend is driving renewed tensions with China’s most important trading partners, including the EU and the US.

French leader Emmanuel Macron and European Commission president Ursula von der Leyen earlier this week warned Xi on a visit to the continent that the EU needed to protect itself from cheap Chinese imports. In the US, the Biden administration is planning to raise tariffs on Chinese electric vehicles and other green energy imports next week.

In response, Xi has brushed off western leaders’ concerns. He told German Chancellor Olaf Scholz last month that China’s exports were helping to ease global inflation, and this week told European leaders that China did not have an overcapacity problem.