Consumer prices in China are falling rapidly as the country’s economy struggles to recover from pandemic-era turmoil.
China’s consumer price index (CPI) fell 0.8% year-on-year in January, the biggest decline since 2009.
According to multiple media outlets, deflation in the retail industry has continued for four months, while deflation in the wholesale industry has continued for 16 months. Food prices fell by 5.9% compared to the same month.
Economists warned that January’s data, which was particularly weak for food, was likely made worse by the timing of Chinese New Year, a major holiday.
“January’s consumer price deflation was the worst in 14 years, but this is skewed. Lunar New Year is a moving holiday (literally) and will be held in January 2023 and February 2024. This distorts food price patterns and exaggerates deflation. [the] “Deflationary trends indicate weakness in domestic demand,” UBS economist Paul Donovan said in a commentary on Thursday.
Analysts at Deutsche Bank noted on Thursday that Chinese stocks have been rising and falling recently.
“There were mixed reactions among Chinese stocks ahead of the Lunar New Year holiday, with the Shanghai Composite (0.71%) rising, but the CSI 300 (0.02%) remaining almost flat. Meanwhile, the Hang Seng Index fell 1.22%. , losses widened,” Deutsche Bank analyst Jim Reid and colleagues wrote on Thursday.
China’s real estate market is under stress. The assets of real estate developer Evergrande were liquidated at the end of January.
“On January 29, 2024, the company was ordered to be liquidated by the High Court,” Evergrande said in a statement last month.
Analysts say real estate developers are looking to the government for help.
“The Ministry of Housing and Urban and Rural Development (MHURD) held a meeting with local officials and financial regulators on Friday to more quickly disburse loans to qualified developers in need,” China Watcher Bill said.・Mr. Bishop wrote in a commentary at the end of January.
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