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Consumer prices in China barely rose in December, underscoring deflationary pressures that have pushed bond yields to historic lows in the world’s second-largest economy.
Consumer price growth was 0.1 percent last month from a year earlier, according to official figures released by the National Bureau of Statistics on Thursday, in line with an average forecast by Reuters analysts. and the slowest in nine months. This figure was lower than the previous month’s growth of 0.2 percent.
The low inflation came despite months of efforts by policymakers to boost demand. Chinese leaders announced in December that the country would formally adopt a “moderately accommodative” monetary policy for the first time in 14 years and seek to “vigorously stimulate consumption.”
The producer price index, which measures ex-factory prices, fell 2.3 percent, slightly better than analysts’ estimates of a 2.4 percent fall and a contraction of 2. 5 percent in November, but leaving the indicator in deflationary territory for the 27th month.
China’s economy is flirting with outright deflation, as a three-year slowdown in real estate has undermined consumer demand, pushing the industry into oversupply.
Beijing is expected to achieve its 5% economic growth target for 2024 through a combination of government stimulus and booming exports, whose price competitiveness in overseas markets has been boosted by domestic deflation.
But analysts warn the formula is wearing thin, with new US President Donald Trump threatening to impose damaging tariffs that could lead to a sharp deceleration in Chinese export growth.
Beijing has announced numerous stimulus measures, including a change in monetary policy in September largely targeting the stock market and aiming to increase household wealth through rising stock prices.
China’s state planner also expanded a subsidy program on Wednesday to encourage consumers to trade in old appliances such as microwaves, rice cookers and dishwashers for newer models.
Economists have expressed doubts about the ability of these measures to revive the economy, predicting that consumer prices will remain virtually stable this year and that factory prices will continue a period of deflation lasting more than two years.
Analysts at Standard Chartered noted “downside risks” to the consensus forecast of 0.9 percent inflation this year.
“Overall CPI inflation could turn negative and remain below 0.5 percent for most of 2025,” they wrote in a research note, adding that producer prices could fall by 2 .5 percent.
The yield on China’s benchmark 10-year government bond has been hovering around record highs since the start of the year, which analysts say reflects investors’ expectations of weak growth and a deflationary outlook for the country. economy.
Chinese stocks and 10- and 30-year sovereign bond yields remained stable on Thursday.
In foreign exchange markets, the renminbi remained stable against the dollar at RMB 7.33 after the People’s Bank of China set the daily exchange rate at RMB 7.19.
The Chinese currency is allowed to trade within 2 percent of the daily rate set by the central bank.
