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Consumer prices in China barely rose in December, underscoring deflationary pressures in the world’s second-largest economy that pushed bond yields to record lows.
Consumer price growth last month was 0.1 percent from a year earlier, in line with the average forecast of Reuters analysts and the slowest in nine months. The reading released on Thursday was lower than the 0.2 percent gain in the previous month.
The producer price index, which measures factory output prices, fell 2.3 percent, slightly better than analysts’ estimates of a 2.4 percent drop and a 2.5 percent contraction in November. The December figure means the gauge has been in deflationary territory for 28 months.
the Chinese economy has been flirting with outright deflation for months as a three-year slump in real estate undermines consumer demand, pushing the industry into oversupply.
Beijing is expected to meet its 5 percent economic growth target for 2024 through a combination of rising exports, whose price competitiveness in foreign markets has been boosted by deflation at home, and government stimulus measures.
But analysts warn that the formula is weak, as US President-elect Donald Trump threatens damaging tariffs that could trigger a sharp slowdown in China’s export growth.
Beijing has also struggled to stimulate domestic demand despite the turn of monetary policy in September which mainly targeted the stock market and sought to increase household wealth through higher stock prices.
The yield on China’s benchmark 10-year government bond is hovering around record lows since the start of the year, which analysts say reflects investor expectations of a low-growth, deflationary outlook for the economy.
Chinese stocks were mixed in early trading on Thursday. The benchmark CSI 300 index remained unchanged, while Hong Kong’s Hang Seng index rose 0.4 percent. Yields on 10-year and 30-year government bonds remained unchanged.
In currency markets, the renminbi was unchanged against the dollar at Rmb7.33 after the People’s Bank of China set the daily trading rate at Rmb7.19.
The Chinese currency is allowed to trade within 2 percent of the daily exchange rate set by the central bank.
