As domestic demand has been on a steady recovery track in the first half, experts said on Monday they expect more proactive fiscal and monetary policies to advance the balanced allocation of financial resources, and further help prices recover.
Their remarks came after the National Bureau of Statistics said on the same day that China's consumer price index, a main gauge of inflation, rose by 0.1 percent year-on-year in the first six months.
The NBS said the first-half core CPI, which excludes volatile food and energy prices and is deemed a better gauge of the supply-demand relationship in the economy, expanded by 0.7 percent year-on-year.
Zhou Mi, a researcher at the Beijing-based Chinese Academy of International Trade and Economic Cooperation, said the gentle CPI recovery reflects the country's strengthening driving force of domestic consumption growth.
Zhou said both solid support from the supply side and stable pork prices have significantly boosted consumer confidence.
Li Peijia, a senior analyst at Bank of China, said China's growing CPI benefits from its large-scale equipment upgrades, consumer goods trade-in policy and efforts to stabilize the real estate sector.
Li said insufficient domestic demand remains the major factor hindering price recovery and the country should further tap into the growth potential of consumption and investment, especially in rural areas.
Zhou Maohua, a researcher at China Everbright Bank, said the supply-demand relationship in China is expected to be further improved in the current half, with enterprise inventories to be reduced and domestic demand to recover stably.
However, Zhou said the frequent extreme weather events and fluctuations in global energy and raw material prices could have an adverse impact on commodities, especially in the midstream and downstream sectors, thus lowering CPI growth.
Against such a backdrop, Zhou said further efforts are needed for the country to improve its infrastructure, increase production efficiency and strengthen the ability to promptly deal with unexpected events.
Meanwhile, the NBS said China's first-half producer price index, which gauges factory-gate prices, dropped by 2.1 percent year-on-year, a decrease of 0.6 percentage point from the first quarter.
The PPI is closely associated with the profits of industrial enterprises, Zhou said, adding that the narrowing decline in China's PPI came as a result of its sound policy support, smooth domestic circulation and resilient foreign market demand.
The country's industrial sector has embarked on a path of recovery. The supply-demand relationship in the sector is getting increasingly balanced and the overall operating conditions of industrial enterprises have continued to improve, he said.
"There still exist some challenges in the sector, such as insufficient effective demand and the severe pressure faced by some companies in daily operations. With more proactive fiscal policies to take effect, the issues will be better dealt with and thereby the PPI is expected to embrace further recovery in the second half," he added.
(Source: China Daily)