China's consumer prices weaken further, adding to deflation worries

Officials led by President Xi Jinping in December made boosting consumption and domestic demand the top priority in 2025, for only the second time in at least a decade. They have pledged to use greater public borrowing and spending as well as monetary easing to spur growth in 2025.

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China's consumer inflation weakened further towards zero in December, decelerating for a fourth straight month in a setback for the government's efforts to drive up demand by injecting stimulus into the economy.

The consumer price index (CPI) edged up 0.1 per cent in that month from a year earlier, in line with the median forecast of economists surveyed by Bloomberg. Factory deflation extended into a 27th month, though the producer price index (PPI) recorded a slower drop of 2.3 per cent, the National Bureau of Statistics (NBS) said on Jan 9.

The persistence of deflationary pressures in China is in stark contrast to other major economies, with elevated inflation risks flagged by US Federal Reserve officials and price growth accelerating in Europe in December.

The worry for Beijing is that an entrenched cycle of price decreases threatens to hold back household spending for longer and damages corporate revenues so much that it stifles investment and leads to further salary cuts and layoffs.