Editor’s note: Tang Duoduo is a research fellow at the Institute of Economics of the Chinese Academy of Social Sciences. The article reflects the author’s opinions and not necessarily the views of CGTN.

On December 9, data released by the National Bureau of Statistics of China revealed a 0.5 percent year-on-year drop in the Consumer Price Index (CPI) and a 3.0 percent year-on-year decrease in the Producer Price Index (PPI) for November. 

Regarding the CPI composition, food, tobacco, and alcohol prices and transportation and communication prices experienced significant declines, with pork prices plummeting by 31.8 percent , contributing to a 0.58 percent decrease in the CPI. 

Meanwhile, education, medical, and other service prices maintained positive growth. The core CPI, excluding food and energy, retained the growth rate of the previous month and rose by 0.6 percent year-on-year in November, continuing its stable trajectory.

November witnessed a relatively weak performance in China’s CPI and PPI, indicating that the Chinese economy is still in a crucial stage of recovery. 

On the one hand, since the adjustment in pandemic control policies at the end of last year, China’s economy has steadily improved, with residents returning to normal life and various plans and tasks progressing as intended. On the other hand, the economic recovery this year has encountered challenges, with the “scarring effect” of the pandemic continuously surfacing and the foundation for the robust economic recovery not yet firmly established. 

A pivotal factor is the evident deleveraging characteristics in the private sector, resulting in relatively sluggish consumer spending and private investment. Consequently, repairing balance sheets and restoring confidence require time.

The meeting of the Political Bureau of the Communist Party of China Central Committee held on December 8 signals that the Chinese government has a clear understanding of the current economic situation. While adhering to the overarching strategy of seeking progress while maintaining stability, the meeting also outlined new policy directions. 

On the one hand, it is essential to promote stability through progress and establish new institutions before dissolving the old, stabilizing the positive economic recovery by moderately strengthening active fiscal policies. On the other hand, there is a need to enhance macro-policy consistency, strengthen economic publicity, and reinforce public opinion guidance, aiming to fortify confidence and reverse expectations through extensive social collaboration.

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