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China’s Factory Gate Deflation Deepens as Consumer Prices Creep Higher

Tightened regulation of price wars is expected to support industrial profits in the absence of new stimulus.

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A man pays for meat at a market in Beijing, China January 11, 2021. REUTERS/Tingshu Wang/File Photo
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Overview

  • Producer prices fell 3.6% in June from a year earlier, marking the largest drop since mid-2023 and extending a 29-month deflation streak.
  • Consumer price index edged up 0.1% in June after four months of declines, while core CPI rose 0.7%, its strongest increase in 14 months.
  • Profits at industrial firms plunged 9.1% in May from the prior year, recording the steepest fall since October 2024.
  • A Politburo meeting chaired by Xi Jinping criticized excessive price competition and urged businesses to upgrade quality and phase out outdated capacity.
  • Leaders have held off on broad stimulus measures and are instead focusing on tighter rules for price wars and capacity cuts pending export trends.