China's Consumer Inflation Weakens to 2-Year Low

economy it's not doing well yeah this side of data it's pretty tough I mean I think in the next couple months we'll probably will see the CPI inflation deep into a negative territory so you know there will be a lot of talk about deflation risk in China what's happening is in this reopening yeah so it's a bit puzzling actually in the first quarter you know the micro numbers are very good right so people are upgrading their GDP forecast and then in April we've seen sort of a mixed pictures we've seen property sector in particular slowing down quickly and we've seen the PMI manufacturing sector PMI drop below 50 so that we started to see a bit of sort of a retreat or cooling of the momentum unfortunately so at this moment I would say it's a it's a bit confusing it's a bit puzzling that why the recovery that happened so quickly and then now taking out at what point does deflation become problematic in China because right now everyone says it's not a big problem this actually gives a more room to cut rates and that could be good you know what's your take on policy now too for the next couple months I think the rich card decision would be a close call for PBOC I think there's not enough urgency for the policy makers to take a big moves yet because they could point to you know the Q1 GDP data is still very strong they could point to say a record high number of tourists in the in the Labor Day holiday you know there are some positive signs as well so it's in my mind I think more likely scenarios they will wait and see they will wait for a couple months to see whether you know some of these numbers started to improve again and then they make decision is this issue a problem that's solved money with monetary policy or is there do they need to bring up another card here that's right that's right I think they need to do not just on the monetary policy side also on the fiscal policy also regulatory policy altogether so they need to send signals on policy front to boost the confidence among investors I think the confidence both among investors also you know for households for general consumers confidence is not strong enough to push out domestic demand yet I mean we've seen a lot of our tourists you know traveling in in the May holiday but their spending level is not back to the pre-COVID level yet right so the there I think there's still room for the government to do a lot more particularly on physical side on the actually monetary side they cut interest rate by 10 basis point I don't think that will change a lot we've been talking about banks and deposit rates and that reports that they might have to cut deposit rates further is that a form of easing you think that is that is I mean that's send a signal to the market but I think that the more important policy rate like the MOF those kind of rates that are more linked to the mortgage rates right so if they take action on that front I think that's more meaningful.

Bloomberg