Chinese economy slips into deflation as recovery falters and demand slows

China's economy has fallen into deflation after consumer prices dropped year on year last month for the first time in more than two years, official data shows, with slowing domestic spending weighing down the postCovid economic recovery.

- Graeme Wearden

The consumer price index, the main gauge of inflation, fell 0.3% in July, the National Bureau of Statistics of China (NBS) said, having flatlined in June. Analysts had anticipated a 0.4% decline.

July's data was China's first negative inflation reading since early 2021, when prices were weaker as the Covid pandemic hit demand and pork prices fell.

Separate figures released on Tuesday showed the country's imports and exports fell more sharply than expected last month, amid waning global demand for Chinese products.

Retailers in China have also been hit by a sales slowdown. Businesses that stocked up on goods in expectation of a surge in demand after Covid are now under pressure to cut prices. The cost of cars has also fallen after Tesla triggered a price war in the electric vehicle market by cutting prices.