China's consumer price index (CPI), which rose sharply in December, saw its pace of increase slow again in January. The producer price index (PPI), which has been declining for years, continued its trend. With market calls growing for additional policy measures to resolve deflation, attention is turning to the economic growth target to be released at the Two Sessions (National People's Congress of China and Chinese People's Political Consultative Conference) one month from now.
China's National Bureau of Statistics released January CPI and PPI on the morning of the 11th (local time). January CPI rose 0.2% from a year earlier, missing the 0.4% increase expected by Reuters. This marks a slowdown after last month's highest rise in three years (0.8%). Core CPI, which excludes volatile food and energy prices, rose 0.8% year over year, slowing from 1.2% in December.
The National Bureau of Statistics explained the slower CPI increase by saying, "There was a base effect because January last year overlapped with the Lunar New Year holiday, which led to sharp increases in food and some service prices," adding, "It was also the impact of lower energy prices due to international oil price fluctuations."
During the same period, PPI fell 1.4%, slightly beating the market expectation of a 1.5% drop, and the decline eased from 1.9% the previous month. It was the smallest drop since July 2024. The year-over-year PPI growth rate has been negative for 40 consecutive months since October 2022.
Reuters said, "The continued decline in PPI is weighing on industrial corporations' profits, which suggests the need for additional policy measures to boost demand and resolve imbalances." Chinese corporations are offsetting weaker domestic demand with increased exports. As a result, even amid a tariff war with the United States, China posted a record trade surplus last year.
Chinese policymakers have said they will stabilize prices by improving supply-demand imbalances in the domestic market, increasing household income to spur consumption, and cracking down on excessive cutthroat competition. Under this policy stance, more proactive macroeconomic policies are planned this year. The People's Bank of China, the Central Bank, cut sector-specific interest rates last month and expanded low-interest loans to small and medium-sized tech corporations and private corporations. A reduction in the reserve requirement ratio (RRR) is also forthcoming. The loan prime rate (LPR), effectively the benchmark rate, is also set to be cut.
Against this backdrop, China will convene the Two Sessions in early March to release the 15th Five-Year Plan (2026–2030) and this year's gross domestic product (GDP) growth target. Bloomberg said, "Thanks to subsidy policies to boost consumption and measures to curb corporations' cutthroat competition, the Chinese economy will begin to show a recovery trend from mid-2026."