China inflation dips to 5 year low
中国通胀率跌至五年来最低水平

China's annual consumer inflation eased to a five year low of 1.4 percent in November. The producer price index also dropped.

For November, China's CPI stood at 1.4 percent, the lowest since November 2009, missing expectation of 1.6 percent and down 0.2 percent from October. This signals to the persistent weakness in the economy, but gives policy-makers more room for policy easing.

There was an unexpected cut to interest rates in November, and some are expecting more monetary easing, which may include a potential 0.5 percentage point cut to bank reserve requirement ratios.

The producer price index fell 2.7 percent year on year, its 33rd consecutive monthly decline. A drop in PPI means that demand at home and abroad remains sluggish and is affecting companies’ pricing power.

A moderate inflation may boost consumption as consumers want to stock up before prices go any higher, but falling prices lead shoppers to delay their purchases and companies to put off investment, which can be hurtful to the economy. Some say that the government is now concerned about the risk of deflation, as many reforms and stimulus in previous months have failed to restore investor confidence.

The annual inflation target for this year was set at 3.5 percent, and the figure is likely to be well under that.

With the central economic work conferencing taking place now, several think tanks have suggested the government to lower its target of inflation to around 3 percent next year.