China's economy hit by fresh blow as new data sparks alarm over deflation crisis
China's economy hit by fresh blow as new data points to deflation crisis
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China is grappling with worsening deflation as consumer prices fell 0.5 per cent year on year in November.
The figures indicate rising deflationary pressures as weak domestic demand casts doubt over the economic recovery.
Data from the National Bureau of Statistics (NBS) showed consumer price index (CPI) dropped 0.5 per cent both from a year earlier and compared with October.
This was deeper than the median forecasts in a poll by news agency Reuters of 0.1 per cent declines both year-on-year and month-on-month.
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The year-on-year CPI decline was the steepest since November 2020.
Economic experts said the data would be alarming for policymakers in China cited falling global energy prices, the fading of the winter travel boom and a chronic supply glut as being the root cause.
Senior economist at the Economist Intelligence Unit Xu Tianchen said: "Downward pressure will continue to rise in 2024 as developers and local governments continue to deleverage and as global growth is expected to slow."
Year-on-year core inflation, excluding food and fuel prices, was 0.6 per cent, the same as October.
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The Chinese economy has grappled with multiple issues this year,
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Chief economist at Jones Lang Lasalle Bruce Pang said the weak core CPI reading was a warning about persistently sluggish demand, which should be a policy priority for China if it is to deliver more sustainable and balanced growth.
China's central bank Governor Pan Gongsheng said last week inflation was expected to be "going upwards".
The Chinese economy has grappled with multiple issues this year, including mounting local government debt, an ailing housing market and tepid demand at home and abroad. Chinese consumers especially have been tightening their purse strings, wary of uncertainties in the elusive economic recovery.
China's finance ministry has reassured traders the economy would rebound and risks were controllable.
China’s leader Xi Jinping this week warned that the country’s economic recovery was still at a “critical stage” as officials pledged to step up fiscal and monetary support.
The Politburo, a top decision-making body of the ruling Communist Party, was quoted by state media as saying the authorities will spur domestic demand and enhance economic recovery in 2024.
Markets are awaiting more government stimulus at the annual agenda-setting "Central Economic Work Conference" later this month.
The prolonged weakness in consumer prices contrasts with inflation in other major economics after they lifted Covid-19 measures.
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