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China CPI forecast: Will China’s tentative reopening spur an inflation rebound?

By Nicole Willing

Edited by Valerie Medleva

14:08, 13 December 2022

White cube blocks with the text, CPI, on Chinese currency
China’s CPI increase dropped to 1.6% in November, down from 2.1% in October and 2.3% in November 2021. Photo: Sean K / Shutterstock

The Chinese consumer price index (CPI) increased at its slowest pace in eight months in November and below the long-term average, but in line with analysts’ expectations as demand remains weak amid Covid-19 restrictions.

China’s CPI increase dropped to 1.6% in November, down from 2.1% in October and 2.3% in November 2021, and below the long-term average of 1.99%, according to China’s National Bureau of Statistics (NBS).

What is CPI and why is it used as a key indicator of a nation’s economic health? 

In this article, we look at current China CPI trends and some of the latest forecasts for 2023 and beyond.

What is CPI?

The rate of CPI growth indicates the pace of price inflation of key goods and services in an economy and provides an important economic indicator. CPI measures inflation by comparing the cost of a basket of goods and services over periods of months and years.

The consumer price index in China includes food, transportation, household items and services, recreation, education and culture goods and services, clothing, health care and residential costs. The CPI is calculated by averaging the change in prices for each item in the basket, and weighting them according to their significance. Core CPI excludes volatile prices such as food and energy.

What’s included in the CPI basket in China?

Economists use a country’s CPI to assess changes in the cost of living and the impact on consumer spending. A rise in CPI indicates a rise in inflation, while a drop in the index points to deflation. Stable inflation rates can lead to increased consumer spending, while falling inflation points to a slowdown in economic expansion. A sharp rise in the cost of living, indicated by a high inflation rate, can mean consumers have less discretionary income available for non-essential goods and services.

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Chinese CPI increase slows on weak demand

The CPI in China fell in 2020 from 105.40 at the start of the year to 99.5 in November, NBS data shows, as the country entered strict Covid-19 lockdowns. The index also came in below 100 in January-February 2021, pointing to deflation. The index moved above 102 in April this year as major cities such as Shanghai emerged from lockdowns and consumers increased their spending activity.

Historical chart: CPI in China

CPI came in at 102.8 in September, moved lower to 102.1 in October and 101.6 in November amid renewed restrictions.

In November, the CPI turned from a rise of 0.1% in the previous month to a fall of 0.2%, led by a 0.8% fall in food prices, NBS noted. Domestic gasoline and diesel prices rose by 2.1% and 2.3%, respectively, because of changes in international oil prices, while pandemic restrictions resulted in a 7.5% drop in air ticket prices and a 2.9% drop in hotel prices.

On an annual basis, November CPI rose by 1.6%, a drop of 0.5 percentage points from October. Food prices rose by 3.7%, a drop of 3.3 percentage points from the previous month, while non-food prices rose by 1.1%, which was the same increase as in October. Core CPI, which excludes food and energy prices, rose 0.6% year on year, the same increase as in the previous month.

CPI growth in China has been far lower than in other countries that have seen inflation rates soar to 30-40 year highs, driven by higher food and energy prices stemming from the Russia-Ukraine conflict and currency weakness against the US dollar (USD).

The impact of China’s lockdowns on economic growth and growing interest rate differentials to other countries that are raising interest rates to tackle high inflation pulled the value of the Chinese yuan renminbi (CNY) down in October to its lowest level against the US dollar since December 2007. That has contributed to CPI inflation in the form of higher prices for imported food and energy.


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The Chinese government’s decision to begin easing vaccination and quarantine protocols has prompted a 3.6% rally in the value of the yuan against the US dollar over the past two weeks. The USD/CNY exchange rate has dropped from 7.2074 on 28 November to 6.97 on 12 December, its lowest level since 14 September. That could see inflation ease lower in December.

What do analysts expect for China CPI rates in 2023? 

Let’s look at some of the latest China CPI predictions below.

China CPI forecast: What is the outlook for Chinese inflation?

“More accommodative policies with a shift from supply-side reforms to demand boost. The politburo has pledged to expand demand for 2023. It may be an important change of policy framework as the top leaders placed more emphasis on supply-side reforms in the past five years. We believe both fiscal policy and monetary policy will be more easing in 2023 than in 2022. If the overseas recession is more severe than expected, China may launch more stimulus next year,” according to an analysis from CMB International. 

“We expect the broad deficit may rise from 5.8% of GDP in 2022 to over 6% in 2023. Liquidity and credit policy should remain easing as the central bank may cut RRR and LPRs twice. The new leaders have also promised to boost consumers’ willingness to expand, indicating that some consumption-stimulus policies may be launched next year.”

CMB’s China CPI forecast for 2023 indicates that stimulus could support inflation at an average of 2.2%, up from 2% in 2022.

Jack Siu, Greater China chief investment officer at Switzerland-based investment bank Credit Suisse, told CNBC last week that the bank’s China consumer price index forecast indicates inflation is likely to remain below 3% in the next 12-18 months: 

“We don’t think CPI is an issue in China, in fact, it’s going to be remaining steady within this range of 1% to 3% in the foreseeable future.”

Analysts at US investment bank Goldman Sachs “do not think inflation will rise as much as in western countries after reopening, with core CPI inflation only increasing from 0.7% this year to 1.2% next year.” They expect headline CPI to average 2.2% next year, up from 2% in 2022.

At the time of writing, the China CPI forecast from economic data provider Trading Economics projected that the index could rise to 105.19 points in 2023 and 107.29 points in 2024, based on its econometric models.

“The shift away from zero-Covid could put some upward pressure on prices going forward. But China seems unlikely to experience the surge in inflation seen in other countries when they opened up and we doubt inflation will become a major policy constraint,” according to the China CPI forecast from Julian Evans-Pritchard, Senior China Economist at Capital Economics

“While the severity of Covid restrictions is being relaxed, activity will probably remain depressed until the second half of 2023, with the reopening infection wave keeping many people at home… To the extent that core inflation does rise over the next two years, it may be offset by a decline in food inflation.”

For the longer term, the International Monetary Fund (IMF’s) China CPI forecast for 2025 indicated that inflation could average 2%, from 1.9% in 2024, and 2.2% in 2022 and 2023. The IMF projects inflation will continue to average 2% in 2026 and 2027, pointing to the potential for a stable China CPI forecast for 2030.

If you’re looking for a China CPI forecast to inform your trading decisions, make sure to keep in mind that analysts and forecasters can and do get their predictions wrong.

We recommend that you always do your own research. Look at the latest market trends, news, technical and fundamental analysis, and expert opinion before making any investment decision. Keep in mind that past performance is no guarantee of future returns. And never invest money you cannot afford to lose.


What is the current CPI in China?

The Chinese consumer price inflation index came in at 103.30 in November, a 1.6% year-on-year increase compared to a 2.1% rise in the previous month.

Is inflation high in China?

Inflation in China has declined below the long-term average as extended periods of Covid-19 restrictions have weakened consumer demand.

Is high CPI good for the stock market?

High CPI inflation may limit consumer discretionary spending, affecting the financial results of exchange-listed companies and investor sentiment. High inflation may also prompt central banks to raise interest rates to slow the increase in prices, which also has the effect of slowing business activity.

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