CHINA INFLATION

China's inflation is reported by the consumer price index (CPI) with monthly, quarterly and yearly updates released by the National Bureau of Statistics. The CPI indicates a comparison of prices with the same period a year earlier.

CPI Composition
China's CPI basket includes eight categories: food, tobacco & liquor, clothing, home appliances, healthcare, transport & telecommunication, education & entertainment, and housing. Food prices, which make up one-third of the basket, are measured in grain, meat & poultry, egg, seafood, vegetable and fruit sub-categories.

CPI Highlights
China's monthly CPI hit a recent-year high of 8.7% in February 2008 as food prices jumped 23.3% in the wake of a 45.3% increase in meat and poultry prices (of which pork prices surged 63.4% due to costlier animal feed). Monthly inflation has since been subdued and dipped to a 33-month of 1.7% in October 2012. On a yearly basis, inflation was -0.7% in 2009 as a result of rampant price increases in the year before.

Measures to Battle Inflation
The Chinese government usually employs a prudent or stringent monetary policy to combat inflation, such as issuing government bonds to reduce money supply, raising interest rates to encourage savings and therefore contain spending, and raising bank reserve requirement ratio to freeze bank loans. Sometimes, it would forcefully suspend major projects to cool an overheated sector.

Historical CPI

Year

CPI

2012

2.6%

2011

4.9%

2010

3.3%

2009

-0.7%

2008

5.9%

2007

4.8%

2006

1.5%

2005

1.8%

2004

3.9%

2003

1.2%

2002

-0.8%

2001

0.7%

2000

0.4%

1999

-1.4%

1998

-0.8%

1997

2.8%

1996

8.3%

1995

17.1%

1994

24.1%

1993

14.7%

1992

6.4%


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