BEIJING (Reuters)
China’s factory-gate prices saw their largest decline in six months in April, while consumer prices fell for the third consecutive month, highlighting the need for increased stimulus as policymakers confront the economic repercussions of the trade war with the United States.
A prolonged downturn in the housing market, elevated household debt, and job insecurity have stifled investment and consumer spending, maintaining deflationary pressures. Additionally, the economy faces rising external risks due to trade barriers.
Despite these challenges, optimism exists for a potential de-escalation of tensions as U.S.-China trade talks commence in Switzerland on Saturday.
The producer price index (PPI) fell by 2.7% in April year-on-year, a deeper drop than March’s 2.5% decrease, yet better than economists’ predictions of a 2.8% decline, according to data from the National Bureau of Statistics released Saturday.
Zhiwei Zhang, chief economist at Pinpoint Asset Management, remarked, “China still faces persistent deflationary pressure. The pressure may rise in coming months as exports will likely weaken.”
Zhang further emphasized, “Even if China and the U.S. can make progress and reduce tariffs, they are unlikely to return to pre-April levels. More proactive fiscal policy is essential to enhance domestic demand and tackle deflation.”
Consumer prices decreased by 0.1% in April compared to a year earlier, consistent with the 0.1% decline in March and matching a Reuters poll forecast. The Consumer Price Index (CPI) rose 0.1% month-on-month, in contrast to the 0.4% drop in March and against economists’ forecasts for no price change.
Core inflation, excluding volatile food and fuel prices, remained at 0.5% in April compared to the previous year, aligning with the March figure.
The Chinese government is enacting various measures to stimulate consumption across multiple sectors, having announced several stimulus initiatives recently, including interest rate cuts and a significant liquidity injection.
As the trade war impacts exports, China’s retail giants, such as JD.com and Alibaba-owned Freshippo, are implementing strategies to assist exporters in shifting toward the domestic market. However, this could further depress prices as business and consumer confidence remains low due to an uncertain outlook.
Global investment banks, including Goldman Sachs, have revised their GDP forecasts for China below the official target of approximately 5%, attributing the downgrade to the adverse effects of the trade war.
Comments (5)
Clifford Obinna Nnamani
05:25 - 13/05/2025
My thoughts is that China has all it takes to survive the trade war @ Clifford obinna Nnamani
Clifford Obinna Nnamani
05:25 - 13/05/2025
My thoughts is that China has all it takes to survive the trade war @ Clifford obinna Nnamani
Odo Christopher
17:44 - 12/05/2025
It's a pity
MD Ladan
04:09 - 11/05/2025
Kt sound natural
MD Ladan
04:09 - 11/05/2025
Kt sound natural