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China’s consumer prices barely rose in December, underlining deflationary pressures that have pushed bond yields to record lows in the world’s second-largest economy.
Consumer price growth was 0.1 per cent against a year earlier last month, according to official figures released on Thursday by the National Bureau of Statistics, in line with an average analyst forecast from Reuters and the slowest in nine months. The reading was lower than 0.2 per cent growth in the previous month.
The weak inflation reading came despite months of effort by policymakers to stimulate demand. China’s leaders announced in December that the country would officially adopt a “moderately loose” monetary policy for the first time in 14 years and work to “vigorously boost consumption”.
The producer price index, which measures factory gate prices, declined 2.3 per cent, slightly better than analyst estimates of a 2.4 per cent fall and a 2.5 per cent contraction in November but leaving the metric in deflationary territory for the 27th month.
China’s economy has been flirting with outright deflation as a three-year property downturn has undermined consumer demand, pushing industry into oversupply.
Beijing is expected to meet its economic growth target of 5 per cent for 2024 thanks to a combination of government stimulus measures and booming exports, whose price competitiveness in overseas markets has been supercharged by deflation at home.
But analysts warn the formula is wearing thin, with incoming US president Donald Trump threatening damaging tariffs that could prompt a sharp deceleration in China’s exports growth.
Beijing has announced numerous stimulus measures, including a monetary policy pivot in September that largely targeted the stock market and sought to boost household wealth through higher equity prices.
China’s state planner on Wednesday also expanded a subsidy programme to encourage consumers to trade in old appliances such as microwaves, rice cookers and dishwashers for newer models.
Economists have raised doubts that such measures will be enough to reflate the economy, forecasting consumer prices to remain virtually flat this year and factory prices to continue a more than two-year run of deflation.
Standard Chartered analysts noted “downside risks” to consensus forecasts of 0.9 per cent inflation this year.
“Headline CPI inflation could turn negative and stay below 0.5 per cent for most of 2025,” they wrote in a research note, adding that producer prices could decline by 2.5 per cent.
The yield on the benchmark 10-year China government bond has been hovering around record lows since the start of the year, which analysts said reflected investor expectations of a low-growth, deflationary outlook for the economy.
Chinese equities and yields on 10-year and 30-year sovereign bonds were flat on Thursday.
In currency markets, the renminbi was flat against the dollar at Rmb7.33 after the People’s Bank of China fixed the daily trading rate at Rmb7.19.
China’s currency is allowed to trade within 2 per cent of the daily rate set by the central bank.
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