China's deflation problem intensifies

China's deflation problem intensifies

Consumer prices in China have fallen to the lowest level in more than a year, which indicates continued deflationary tendencies in the second largest economy in the world.

decline in consumer prices

The consumer price index (VPI), an important indicator of measuring inflation, fell by 0.7% in February compared to the previous year, such as the National Statistics Office Chinas (NBS) on Sunday. This decline was more likely to be more than a survey of Reuters and marked the first decline since January "> 2024 after the VPI rose only by 0.5% in January.

consequences of deflation

deflation is a major problem because it gives people little incentive to consume now, in anticipation of falling prices. This can lead to a decline in consumption that is a decisive factor for economic growth.

Influence of the New Year's Festival

The decline in February was partially influenced by the celebrations that were previously taken as usual to the New Year, during which a hundred million trips were taken , which the tourism industry and the expenses streamed. This year the festival fell completely into January, while it reached into February last year. Therefore, in 2024 there was a significantly higher basis for the comparison.

some positive aspects

The NBS said that consumer prices would have increased by 0.1% without the influence of the earlier spring festival. The core VPI, which does not take volatile prices such as food and energy, also fell by 0.1%-the first decline since January 2021.

producer prices continue to fall

The Producer price index (ppi) in February compared to the previous year, a decline of 2.2%. The prices on the factories have been declining for 29 months in a row since October 2022.

economic challenges

"Apart from temporary seasonal distortions, both the inflation of the VPI and the PPI have been too low in the past two years, which indicates an imbalance between supply and demand in the Chinese economy," write economists from Goldman Sachs in a research note on Sunday.

The Chinese economy continues to suffer from weak consumption expenditure, uncertain employment perspective and a long -lasting decline in the real estate sector. Internationally, she sees itself under pressure, while the United States increased the pressure in the trade war against China, which has long been dependent on exports to boost growth.

state measures for stabilization

"The uncertainty of the external environment increases, while we are also confronted with problems such as inadequate domestic demand and operational difficulties in some industries," said Zheng Shanjie, head of the national development and reform commission of China, in a press conference last week.

Beijing has set an ambitious economic growth goal of 5% for 2025, and the target for the increase in consumer prices this year has been reduced from 3% to 2%, which signals Beijing's recognition of the continued deflationary tendencies.

During the excited opening of the solemn legislative last week, the government failed to announce large -scale economic measures to promote growth, even though it emphasized the need to stir up consumption.

outlook on employment and the real estate market

at a press conference on the seam of the national folk congress on Sunday, Wang Xiaoping said, Wang Xiaoping, Minister of Labor and Social Security that the task of stabilizing and expanding employment this year will be "tedious" and "under pressure".

NI Hong, Minister for Housing and Urbane-Rural Development, emphasized that the government is "doing everything possible to stabilize and restore confidence in the real estate market". He emphasized the Quota of 4.4 trillion Yuan ($ 608 billion) for local special bonds this year, some of which are used for the purchase of completed commercial properties. The acquired residential projects are to be converted into affordable living space and workers' accommodation.