Experts call for efforts to expand demand

Overall price levels in China are likely to rise, from moderately to significantly, as domestic demand is expected to improve amid a series of policy measures aimed at boosting consumption and increasing investment, experts said.

They also said the decline in the nation's producer price index, or PPI, which gauges factory-gate prices, is expected to have further slowed down, perhaps on a large scale, in May.

However, they have called for more measures to expand aggregate demand, highlighting the persistent imbalances of supply and demand in the economy.

Their comments came as the National Bureau of Statistics is scheduled to announce on Wednesday the latest readings of the consumer price index, which is a key indicator of inflation, and the PPI.

"As economic recovery is on track and gathering pace, CPI growth is likely to speed up while the drop in the PPI will narrow," said Cai Hanpian, a researcher at Peking University's National Economy Research Center.

Considering factors like expansion of economic activities, stable pork prices and an uptick in the prices of utilities, Cai said she expects that the CPI in May will have risen 0.6 percent year-on-year, up 0.3 percentage points compared with the growth in April.

Wen Bin, chief economist at China Minsheng Bank, estimated that the core CPI, which excludes volatile food and energy prices and is deemed a better gauge of the supply-demand relationship, will have risen moderately on both a monthly and a yearly basis in May.

The CPI will have climbed 0.5 percent from a year ago in May while keeping flat from April, Wen said.

Wang Qing, chief macroeconomic analyst at Golden Credit Rating International, said he expected that the CPI will grow by around 0.4 percent year-on-year in both May and June.

As for the PPI, Cai, the Peking University researcher, said it is likely to have registered a 1.6 percent decline in May, which would be about 0.9 percentage point slower compared with a month earlier.

The expected slowdown in the decline will probably be driven mainly by faster growth in prices of key manufactured goods, Cai said.

Wang, with Golden Credit Rating, estimated that the PPI in May will likely have increased on a monthly basis and showed a much slower decline on a yearly basis.

Experts warned that the current low levels of prices reflect insufficient demand compared with supply in the real economy, and they said more supportive measures should be released to further boost market expectations and expand demand.

According to the NBS, the PPI stayed negative for the 19th consecutive month in April, dropping 2.5 percent year-on-year, following a 2.8 percent fall in March.

The CPI, on the other hand, rose 0.3 percent year-on-year in April after a 0.1 percent gain in March.

"The supply of goods and services is stable, and insufficient demand is a main cause of current low-level prices, which justifies recent policy measures boosting demand, like the promotion of large-scale equipment replacement and trade-in deals for consumer goods," said Wang. "The key is avoiding a cycle of 'low prices, low income and low consumption'."

Stabilizing the property market will be critical to boosting consumer confidence, he said, adding that measures including handing out consumption vouchers and enhancing the consumption environment are also important.

Xiong Yuan, chief economist at Guosheng Securities, said more efforts should be made on the demand side to stabilize prices.

He suggested that the People's Bank of China, the country's central bank, further cut the reserve requirement ratio and interest rates. Furthermore, the government should accelerate the implementation of recently released support policies for the real estate industry, speed up issuance of ultralong-term special treasury bonds, and intensify trade-in deals for consumer goods, he said.

Qi Xiangdong, chairman of Chinese cybersecurity company Qi-Anxin Technology Group, said that supportive policy measures have been helping enterprises pursue high-quality development, but more efforts are expected to further enhance financing for private enterprises and remove invisible market barriers for them.