China will publish November's economic figures starting from Wednesday. As key measures for inflation, economists have forecast that both the Consumer Price Index and the Producer Price Index will see a decline, and the threat of deflation emerges. CRI's Lin Lin has the story.

Reporter:
The increasing rate of CPI and PPI in October are 4 percent and 6.6 percent respectively compared with the same period last year. Many economists believe that their November figures will continue to decline and the CPI could even fall below 3 percent.

Zhang Yongjun, a macro-economist with China's State Information Centre, says the drop in food price is a main factor causing the decline of the CPI figure.

"Food price is mainly influenced by the world price of agricultural products, which has kept going down for months. This has lowered the domestic price of meat. Plus, the governmental subsidizing policies have also played an active role."

Meanwhile, Zhang Yongjun says the falling price of raw materials like construction materials in the world market is one of the reasons that prompted the decline of the Producer Price Index. He adds this shows that the Chinese manufacturing industry has been influenced by the shrinking demand.

"The price indices can reflect the changes in the market demand. As the influence of the global financial turmoil on the real economy is enlarging, both the CPI and PPI may continue going down in the following year."

To encourage exports and boost domestic consumption, the Chinese government has undertaken a series of measures, including a stimulus package of 4 trillion yuan and policies in favour of Chinese exporters.

Zhang Yongjun believes that these actions will help to expand the domestic market as well as increase export, but it may take times to see the effect.

"The four trillion investments will take powerful effect in the domestic market; however it may not have immediate effect to stop the decline of commodity price. It takes time for the projects to be fully carried out and trigger real market demand. And in the exportation, although the cost of exporters are lowered with rising export rebate rate, the volume of export will go on declining until the world market is recovered."

According to the economist, the decline of the increasing rate of CPI and PPI might continue till the 3rd quarter next year. Before then, the possibility of deflation, a persistent decrease in the level of consumer prices, will also be a threat to the country's overall economy.

Lin Lin, CRInews.