Shocking: Chinese Prices Stay Low Despite Strong Deflationary Forces - You Won't Believe It!

In a world where economic uncertainties loom large, staying informed is key to navigating the ever-changing landscape. One way to do this is by signing up for the Chinese Economy myFT Digest. Receive free updates directly in your inbox to stay ahead of the curve.

China’s Consumer Price Index:

Consumer prices in China saw minimal growth in December, highlighting the deflationary pressures faced by the second-largest economy in the world.
With a mere 0.1% increase from a year earlier, this rate was in line with analyst forecasts but marked the slowest growth in nine months.
This data signals the challenging economic conditions that have led to record low bond yields.

Producer Price Index:

The Producer Price Index, which measures factory gate prices, declined by 2.3% in December. This figure was slightly better than expected, hinting at some stabilization in the market.
Despite this, the index has been in deflationary territory for 28 months, showcasing the larger economic struggles faced by China.

Amidst these challenges, China’s government is striving to meet its economic growth target through a mix of strategies that include boosting exports and implementing stimulus measures. However, this approach may face hurdles in the form of potential tariffs imposed by the incoming US president, Donald Trump. Such tariffs could lead to a significant slowdown in China’s export growth.

Despite efforts to stimulate domestic demand through monetary policy adjustments, the Chinese economy continues to face a deflationary outlook. This is reflected in the record-low yields on government bonds, which suggest investor expectations of minimal growth in the near future.

As Chinese equities show a mixed performance and the currency remains relatively stable against the dollar, it is evident that the economic landscape is filled with uncertainties. Staying informed and adapting to the changing circumstances will be crucial for individuals and businesses navigating the complexities of the Chinese economy.