Chinese consumer prices fell in January at their quickest rate in more than 14 years, data showed Thursday, piling pressure on the government for more aggressive moves to revive the country’s battered economy.
Officials have struggled for months to kickstart economic growth as they battle a range of headwinds, including a prolonged property-sector crisis, soaring youth unemployment and a global slowdown that is hammering demand for Chinese goods.
Policymakers have in recent months announced a series of targeted measures as well as a major issuance of billions of dollars in sovereign bonds, aimed at boosting infrastructure spending and spurring consumption.
But that, and recent announcements including central bank interest rate cuts and measures to boost lending, have had little impact so far.
And analysts warn a “bazooka” stimulus plan is needed to restore confidence.
“China needs to take actions quickly and aggressively to avoid the risk of deflationary expectation to be entrenched among consumers,” Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, said.
January’s 0.8 percent drop in the consumer price index, announced by the National Bureau of Statistics, marked the fourth straight month of deflation and was much bigger than the 0.5 percent fall forecast in a survey by Bloomberg News.
The reading was the worst since the second half of 2009, during the global financial crisis.
And a 2.5 percent plunge in the producer price index — which measures the cost of goods leaving factories — signalled continued weakness.
China slipped into deflation in July for the first time since 2021 and, apart from a brief rebound in August, have been in constant decline since.
“The primary drag on inflation continued to be food prices, which fell by 5.9 percent year-on-year, the lowest level on record,” said Lynn Song, Chief Economist for Greater China at bank ING.
However, he pointed to figures showing costs rising month-on-month.
“While a far cry from the above-target inflation levels seen in many other economies, these numbers do not imply China is stuck in a deflationary spiral,” Song said in a note.
“We see a high likelihood that January’s data could mark the low point for (year-on-year) inflation in the current cycle.”
China’s sinking prices are in stark contrast with the rest of the world, where inflation remains a persistent bugbear, forcing central banks to ramp up interest rates.
While deflation suggests goods were cheaper, it poses a threat to the broader economy as consumers tend to postpone purchases, hoping for further reductions.
A lack of demand can then force companies to cut production, freeze hiring or lay off workers, while potentially also having to discount existing stocks — dampening profitability even as costs remain the same.
In reaction to the woes in the world’s number two economy, markets have been among the worst-performing globally in recent months.
On Wednesday, the chairman of China’s securities regulator, Yi Huiman, was replaced after overseeing a sell-off that has wiped trillions off companies’ valuations.
The losses have prompted pledges of support, with Xi Jinping also becoming more involved, though observers say the moves would not solve the country’s deeper economic problems, which needed to be addressed to fully restore optimism
— Bloomberg News contributed to this story —
