Consumer prices in China rose marginally in December, highlighting persistent deflationary pressures in the world’s second-largest economy, which have driven bond yields to record lows.
Consumer prices increased by 0.1 percent last month compared to a year earlier, aligning with Reuters’ average analyst forecast. This marks the slowest growth in nine months and is lower than November’s 0.2 percent rise, as reported on Thursday.
The producer price index, a measure of ex-factory prices, declined by 2.3 percent. This was slightly better than analysts’ forecasts of a 2.4 percent drop and an improvement from November’s 2.5 percent contraction. December’s data indicates that the index has been in the deflationary zone for 28 consecutive months.
The Chinese economy has been grappling with deflation for months, exacerbated by a three-year property crisis that has dampened consumer demand and led to industrial oversupply.
Beijing is expected to achieve its 5 percent economic growth target for 2024 through a combination of price competitiveness in global markets, domestic deflation, and strengthening exports supported by government stimulus measures.
However, analysts caution that this strategy is being undermined by U.S. President Donald Trump’s threat of significant tariffs, which could sharply slow China’s export growth.
Additionally, Beijing has faced challenges in boosting domestic demand, even after a September monetary policy shift aimed at stimulating the stock market and enhancing household wealth through higher stock prices.
The yield on China’s benchmark 10-year government bond has remained at record lows since the start of the year, reflecting investor expectations of slow economic growth and a deflationary outlook.
On Thursday, Chinese stocks displayed mixed performance. The benchmark CSI 300 index was unchanged, while Hong Kong’s Hang Seng index rose by 0.4 percent. Yields on 10- and 30-year government bonds remained stable.
In currency markets, the renminbi was steady at Rmb7.33 against the dollar after the People’s Bank of China set the daily trading rate at Rmb7.19. The renminbi is permitted to trade within a 2 percent range of the central bank’s daily rate.
