China: Rising inflation is not a near-term concern – Standard Chartered

According to analysts at Standard Chartered, rising inflation has become a hot topic in China recently.

Key Quotes

“The discussion usually centres on three major risks that could cause CPI inflation to rebound sharply in the coming months: (1) rising food inflation as hot weather, typhoons and the spread of African swine fever (in limited locations) have reportedly reduced production of staple food products; (2) surging growth in housing rents since earlier this year, which has attracted growing public attention in the past two months; and (3) rising imported inflation as a result of a weaker Chinese yuan (CNY), higher tariffs on US imports and rising crude oil prices.”

“We think these fears are overdone, and we do not expect inflation to become a real concern in 2018.”

“We expect monthly CPI inflation to rise towards 2.8% y/y by end-2018, rising to a monthly average of 2.4% in August-December from 2.0% in January-July. This is still lower than the official inflation target of around 3.0%.”

“We expect food inflation to recover only moderately in the coming months, averaging 1.3% y/y in August-December, compared with 1.1% YTD.”

“We expect non-food CPI inflation to average 2.7% y/y in August-December, up from 2.2% YTD.”