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2mo ago

China Faces Deflation as Consumer Prices Drop Sharply

Consumer prices fell 0.7% in February, marking the first year-on-year decline in over a year, as weak demand and trade tensions pressure Beijing's economy.

Customers select tomatoes at a stall inside a morning market in Beijing, China August 9, 2023. REUTERS/Tingshu Wang/File Photo
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Delegates and security wait before the opening session of the National People's Congress at the Great Hall of the People in Beijing, China, on March 5, 2025.
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Overview

  • China's Consumer Price Index (CPI) fell 0.7% year-on-year in February, reversing January's 0.5% increase and marking the sharpest drop in over a year.
  • Core CPI, which excludes volatile items like food and energy, declined 0.1%, the first contraction since 2021, reflecting persistently weak domestic demand.
  • The Producer Price Index (PPI), tracking wholesale prices, fell 2.2% in February, marking the 29th consecutive month of contraction in factory-gate prices.
  • Economic challenges are compounded by an escalating trade war with the U.S. and a prolonged downturn in China's property sector, further straining growth prospects.
  • Beijing has set a 5% GDP growth target for 2025 and lowered its inflation target to 2%, but analysts warn that without stronger fiscal and monetary stimulus, deflationary pressures may persist.