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China’s consumer prices remained in deflation for the fourth straight month and producer prices fell at their fastest pace in nearly two years, piling pressure on policymakers as they try to boost domestic demand and negotiate trade tensions with the US.
The country’s consumer price index fell 0.1 per cent year on year in May, the National Bureau of Statistics said on Monday. Producer prices, which reflect the cost of goods at the factory gate, dropped 3.3 per cent, the fastest rate of decline since July 2023.
US-China trade tensions have weighed on the economic backdrop in a country already grappling with a prolonged property slowdown. Talks between US and Chinese representatives are expected to take place in London later on Monday, after a telephone call between US President Donald Trump and his Chinese counterpart Xi Jinping last week.
Inflation data in China has for years been close to deflationary territory, raising concerns over consumer confidence and adding to calls for more stimulus from Beijing.
The People’s Bank of China last month announced cuts to key lending rates as part of a steady easing that has also seen mortgage rates reduced to support the housing sector.
There has also been intense competition in mainland industries especially in the automotive sector, which has seen a wave of recent price cuts amid a battle for market share.
Zichun Huang, China economist at Capital Economics, noted core inflation, which excludes food and energy, rose 0.6 per cent, its highest level in almost a year, but added that “persistent overcapacity will keep China in deflation both this year and next”.
