A June report by Bain & Company revealed that Chinese consumers are experiencing a form of “luxury shame,” reminiscent of the sentiments seen in the U.S. during the 2008-2009 financial crisis. In January, China reported a consumer inflation rate of 0.2%, below the expected 0.4%, marking the highest rise in three years. Core CPI, excluding volatile prices, increased by 0.8%, showing a deceleration from December’s 1.2%. Meanwhile, the producer price index declined by 1.4% year-on-year, indicating ongoing deflationary pressures.
Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, suggested that data interpretation is complicated due to the timing of the Lunar New Year, which affects price comparisons. Analysts noted that holiday-related price increases were weaker this January compared to last year, emphasizing the need to assess January and February together.
Factory-gate price deflation has persisted for over three years, impacting manufacturers amid weak consumer confidence and disruptions due to U.S. trade policies. Although China’s economy grew 5% last year, supported by strong exports, ongoing deflation, a struggling real estate sector, and an uncertain job market remain challenges.
In light of these conditions, policymakers are considering stimulus measures to boost consumption, despite concerns over increasing the debt burden, which has risen significantly since 2019. As fiscal pressures mount, the People’s Bank of China reiterated its commitment to implementing accommodative monetary policies aimed at stabilizing the economy and promoting price recovery. Economic goals for the year are expected to be outlined in the upcoming Congress session.
Source link
