China’s consumer prices continued to fall last month, with official data highlighting the battle leaders face in trying to kickstart domestic spending in the world’s number two economy while fighting a trade war with the United States.
Beijing has spent recent years grappling with a range of issues that have weighed on growth and consumer activity, including a persistent slump in the country’s vast property market and high youth unemployment.
That has been compounded by a renewed standoff with Washington since Donald Trump became US president and unleashed a tariff war on the world, with a particular eye on Beijing.
The uncertainty this has fanned has made the country’s army of shoppers tighten their wallets.
Figures on Wednesday showed the country’s consumer price index — a key measure of inflation — dropped 0.3 percent year-on-year in September.
The reading from the National Bureau of Statistics (NBS) was a slight improvement on August but worse than the 0.2 percent fall forecast in a Bloomberg survey.
It also comes a day after the International Monetary Fund’s latest World Economic Outlook report noted a “weakness in domestic demand” in China — echoing a broader Asian outlook dimmed by the US trade war.
The IMF added that a “rebalancing” of China’s economy through fiscal measures targeting social spending and property would help battle deflationary pressure.
While deflation may be appreciated by consumers, it poses a threat to the broader economy as households tend to postpone purchases in the hope of even lower prices.
China’s inflation stabilisation is “fragile and volatile”, said Tianzeng Xu from the Economist Intelligence Unit in response to Wednesday’s data.
“The housing market has not yet recovered and the labour market remains weak,” Xu added.
And Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, wrote in a note: “The trade tension returned and growth outlook uncertainty heightened, which is negative for demand recovery.”
The NBS figures also showed the producer price index, which measures the cost of goods before they enter wholesale or distribution, fell 2.3 percent last month, in line with the Bloomberg forecast and an improvement from August.
While tensions between Washington and Beijing have eased from their peak, a truce struck by the leaders earlier this year remains shaky.
After months of relative calm Trump warned Friday that he would roll out an additional 100 percent tariff on the country’s goods from November 1. That came after Beijing imposed fresh controls on the export of rare earth technologies and other items.
China’s commerce ministry vowed Tuesday to “fight to the end” in its trade war with Washington, if necessary.
The latest salvoes came as trade figures from Beijing on Monday provided some hope for the economy, with shipments to the United States — the world’s largest consumer market — rising 8.6 percent on-month in September.
Top leaders from the ruling Communist Party will convene in Beijing next week for a closely watched gathering to discuss China’s plan for the next five years, including economic and social development goals.
Analysts agree that more demand-side support from policymakers would be needed to prop up the economy.
Until then, there will be “little prospect of a meaningful improvement in China’s deflationary environment in the near term”, wrote Zichun Huang, China Economist at Capital Economics, in a note.
