China's economy started the year slowly and performed weakly. Domestic demand continues to be weak and deflationary pressure is increasing.
Official data showed factory-gate prices fell for a second consecutive year in 2024, while consumer prices rose only slightly.
job insecurity, Real estate market in long-term downturndebt and Tariff threat The incoming administration of U.S. President-elect Donald Trump is still taking a toll on demand even as Beijing ramps up stimulus.
See also: Trump could declare national economic crisis over new tariffs: CNN
Data from the National Bureau of Statistics showed that the consumer price index (CPI) for the year rose by 0.2%, which was the same as the previous year's increase and far lower than last year's official target of about 3%, indicating that inflation did not reach the expected target for the year.
In December, CPI increased by 0.1% year-on-year, which was slower than the 0.2% increase in November and was the lowest increase since April. That was in line with forecasts in a Reuters poll of economists.
However, core inflation, which excludes volatile food and fuel prices, edged up to 0.4% last month from 0.3% in November, the highest level in five months.
On the upstream side, the producer price index fell by 2.3% year-on-year in December, lower than the 2.5% decline in November and the expected 2.4% decline. Ex-factory prices have remained deflationary for 27 consecutive months.
Julian Evans-Pritchard, China economics chief, said a recovery in core consumer prices and a slowdown in factory deflation suggested “policy stimulus is providing some support to demand and prices”.
“But as support from stimulus measures is likely to be short-lived, we think underlying inflation will fall back again later this year.”
Electric vehicle price war
except one Electric vehicle price war enters third yearthe discount has now been extended to the entire retail sector, including bubble tea shops and other non-essential items.
Cautious consumers are increasingly choosing to rent items such as cameras and handbags rather than buy them.
“Deflationary pressures persist,” said Zhang Zhiwei, president and chief economist of Pindian Asset Management.
“The downturn in the real estate industry is not over yet, and this continues to weigh on consumer confidence,” he said. “The outlook for inflation depends largely on the effectiveness of fiscal policy.”
In late December, the World Bank raised its forecast for China's economic growth in 2024 and 2025, but warned that low household and business confidence and headwinds in the real estate industry would remain a drag.
China has agreed in record time Issuance of US$411 billion in special government bondsIt comes as Beijing ramps up fiscal stimulus to revive its faltering economy.
State planners said last week that Beijing would significantly increase its funding of ultra-long-term government bonds in 2025 to spur business investment and consumption stimulus plans.
The authority set aside $41 billion in government bonds in July to fund equipment upgrades and Trade-in consumer goods Including cars.
- Reuters Additional editing by Jim Pollard
See also:
Trump says he and China's Xi Jinping might 'get along great'
China's top automakers continue electric vehicle price war for third year in a row
China plans to issue record $411 billion in bonds in 2025: sources
Trump plans to restrict China's electric vehicle supply chain
China to take on more debt in response to Trump tariffs
China's central bank 'allows yuan to depreciate' as trade risk
Chinese media on Trump: “There are no winners in the tariff war”
China 'keen to negotiate trade deal to reduce tariff threat'
