In December 2024, China experienced a slight increase in consumer prices, edging up 0.1% year-on-year, aligning with expectations but raising deflation concerns due to a slowdown from the previous month’s 0.2% rise. The producer price index also fell by 2.3%, continuing a 27-month decline, but performed slightly better than anticipated. These figures highlight ongoing issues with weak domestic demand, despite multiple stimulus efforts from the government, including interest rate cuts and support for markets. A newly expanded consumer trade-in scheme aims to boost consumption by encouraging equipment upgrades. Some indicators suggest a potential recovery in factory activity, which has been growing, albeit at a slower pace. Analysts remain cautious, noting that while there are signs of recovery since the policy shifts last September, significant challenges persist, particularly in the property sector and trade tensions with the U.S. Economic forecasts suggest that the expected improvement in consumer spending may underdeliver. Additionally, the onshore yuan recently fell to a 16-month low against the dollar, influenced by rising Treasury yields and a strengthening dollar.
