Nation in good shape as inflation kept well in check

China may be better-placed than most countries to keep food prices under control.

Inflation has been kept mostly in check, with the Consumer Price Index rising by just 1 percent in July, about one-third the level of such rises in many developed economies. Prices in China fell in January and February.

Inflation in the nation peaked at the end of 2019 and started falling last year, with the annual inflation rate negative in October 2020 and during the first two months of this year.

In May, the CPI rose by about 1.3 percent on an annual basis and has been falling since then, while according to the National Bureau of Statistics, or NBS, prices rose by 0.8 percent year-on-year in August.

However, food prices fell by 4.1 percent in August from a year earlier, after dropping by 3.7 percent in July. Non-food prices rose by 1.9 percent in August.

One significant factor is pork. Prices for the meat, which is widely consumed in China, fell by nearly 45 percent year-on-year in August.

Barsali Bhattacharyya, manager for Industry Briefing at The Economist Intelligence Unit, said, "China remains a notable exception, as a recovery in pork supply has pulled down food prices, despite disruption caused by recent floods."

The government has also stepped in to shore up pork reserves and keep prices down.

Dong Lijuan, a senior statistician at the NBS, said occasional COVID-19 outbreaks, unusually strong rainstorms and intense summer heat affected production and prices of supplies such as fresh vegetables and eggs.

Rising prices for such produce were balanced out by falling pork charges, keeping overall food prices down, Dong said.

An expected delay in consumption recovery caused by recent COVID-19 cases in China, along with accompanying restrictions, has had a deflationary impact, meaning that food prices in the nation have risen more slowly than elsewhere.

The country appears to have fully recovered from an outbreak of African swine fever in 2018, helping pork production return to normal levels.

Wholesale pork prices have fallen by about 54 percent to 20.17 yuan ($3) per kilogram, roughly the level they were at before the pandemic reduced supplies and prices shot up.