National inflation rates are commonly based on the Consumer Price Index (CPI) of the respective country. The CPI is an economic indicator that measures changes over time in the price level of a representative basket of consumer goods and services for a defined population and geographic region. The Chinese Consumer Price Index is calculated by the National Bureau of Statistics of China on a monthly and annual basis. It covers the prices of goods and services of 262 basic divisions grouped into eight categories, which represent the living consumption of urban and rural residents.
Over the last two decades, the inflation rate in China ranged at a low and stable level, averaging 2.2 percent annually. This was the lowest level of inflation of all BRIC countries and differed only moderately from the inflation rates of developed countries. However, since accounting methods vary, the low Chinese inflation figures may not adequately display the rise in cost of living felt by many people living in China’s fast-growing cities and urban areas.
When looking at the monthly development of the inflation rate, there was a sudden increase from 2.8 percent in September 2019 to 5.4 percent in January 2020. This escalation was mainly driven by food prices – especially pork and meat prices, which skyrocketed due to the outbreak of the swine flu in China in 2019 –, whereas prices for most other goods and services remained stable or decreased. After January 2020, prices fell as fast as they had risen, effected by the successful fight against the swine flu and the global spread of the coronavirus pandemic. In November 2020, inflation rates even reached negative values. Inflation is forecasted to return to levels between 1.6 to 2.9 percent in 2021.