Concerns over deflation in the Chinese economy are spreading despite various economic stimulus measures. Although commercial banks are encouraging consumption by lowering deposit interest rates due to the authorities’ threat, the consumer price index has been in negative territory for four months, and the domestic demand is stagnating. As the head of the regulatory authority has been replaced in a surprise move on Friday, attention is focusing on whether special measures such as a cut in the LPR, the benchmark interest rate for loans, will be taken after the Lunar New Year.
According to China’s National Bureau of Statistics on Wednesday, the CPI fell 0.8 percent in January year-on-year. The CPI fell sharply below the previous month’s -0.3 percent and the estimate (-0.5 percent), and the sluggish consumption that has continued since last year is intensifying.
China’s CPI fell 0.3 percent in July last year, hit negative territory for the first time in two years and five months, before rebounding 0.1 percent in August this year, but has shown negative territory for four consecutive months since October. Analysts say that due to severe economy difficulties, Chinese people are not opening their wallets even ahead of the Lunar New Year holiday, which is the peak season this month.
In short, food prices fell 5.9 percent. In particular, pork prices, the top favorite food of Chinese people, plunged 17.3 percent, while prices of fresh vegetables and fruits also fell 12.7 percent and 9.1 percent, respectively.
The producer price index (PPI) for January, which was also announced on the same day, fell 2.5 percent year-on-year. Although the decline was down from the previous month (-2.7 percent), it has been negative for 16 consecutive months since October 2022 (-1.3 percent).
According to the Chinese economic media Cheil Industries on the day, deposit interest rates at commercial banks in China are on the decline. The measure is aimed at preventing shrinking consumption by increasing savings. As Chinese people increased their deposits during the economy recession last year, the total amount of deposits increased by 16.7 trillion yuan year-on-year.