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China's economic woes worsen with amplifying deflationary pressures

China's economic woes worsen with amplifying deflationary pressures

Posted on January 15, 2024   |  

In December, China's consumer prices dropped for the 3rd month in a row, with the Consumer Price Index (CPI) falling by 0.3% compared to 2022 and showing a 0.1% increase compared to the previous month.

Economists had predicted a 0.4% year-on-year decrease and a 0.2% month-on-month gain.

Pork prices, which significantly affect CPI, fell by 26.1%, reducing the overall year-on-year decline by 5.7 percentage points. 

On the other hand, prices for services, especially in tourism (6.8%) and hotel accommodation (5.5%), went up.

The Producer Price Index (PPI) saw a 2.7% decline in December, marking the 15th straight month of drops, slightly worse than the expected 2.6% slide.

China's central bank, the People's Bank of China (PBOC), promised to increase macroeconomic policy adjustments to support the economy and boost prices.

For the whole of 2023, the CPI rose by 0.2%, falling short of the official target of around 3%, showing that actual inflation has been below yearly targets for 12 consecutive years.

China's economic plans include issuing 1 trillion yuan ($139.39 billion) in sovereign bonds for investment projects and committing to proactive fiscal policies in 2024, emphasizing increased government spending to revive the economy.



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