A dramatic fall in the rate of Chinese inflation is likely to lead to the country loosening its macroeconomic policy.
This would be welcomed by many exporters of recyclate who believe that China has introduced duties on importing materials and sought to suppress the price of commodities as part of its fiscal tightening measures over recent months.
China’s consumer price index rose by 4.2 per cent in November compared to the same month last year. However, this was lower than the 5.5 per cent inflation increase seen in October. It was the lowest inflation reading since September 2010.
Last month, data showed that the Chinese manufacturing sector contracted for the first time in almost three years. While export growth to Europe and the US has also dropped off in recent months.
The Chinese government has a full year target for 4 per cent inflation and has implemented a series of measures including raising interest rates, curbs on how much banks can lend as well as duties and attempts to tame prices of commodities.
It is unlikely to meet its target, but with growth now slowing rapidly, it is believed that the government in Beijing is now switching its attention away from taming inflation, but looking at growth instead.
Last week, its central bank cut the reserve requirement for the country’s banks for the first time in three years, which was seen as attempts to start easing the money supply.