China said over the weekend that consumer prices slumped in April for the third month in a row, reflecting persistent challenges as leaders attempt to revive an economy stymied by sluggish spending and a fierce trade war with Washington.
The world’s second-largest economy has grappled with persistent deflationary pressure in recent years, as longstanding woes in the property sector and export headwinds impede growth.
US tariffs on imports from manufacturing powerhouse China now stand at a staggering 145%for many products – and reach as high as 245% cumulatively on others.
Trump suggested on Friday that the tariffs could be cut to 80%, though Beijing has demanded a complete cancellation of the levies that are compounding other challenges facing the Chinese economy.
The consumer price index (CPI) – a key measure of inflation – was down 0.1% last month year-on-year, according to data released by the National Bureau of Statistics (NBS), following previous drops in February and March.
The reading was in line with a Bloomberg forecast of a 0.1% year-on-year decline based on a survey of economists, and consistent with the slight drop recorded in March.
NBS statistician Dong Lijuan said in a statement about the data that “international imported factors have a certain downward impact on prices in some industries”.
“China still faces persistent deflationary pressure,” said Zhiwei Zhang, President and Chief Economist at Pinpoint Asset Management, in a note.
The intensity of contributing factors “may rise in coming months as exports will likely weaken”, said Zhang, adding that “more proactive fiscal policy is necessary to boost domestic demand”.
The NBS also said that April’s producer price index (PPI) – another indicator of inflation – declined 2.7% year-on-year, accelerating from the 2.5% drop recorded in March.
China’s PPI has remained mired in negative territory for more than two years and the latest drop was in line with expectations.
“Changes in the international trade environment and a rapid decline in some international bulk commodities have affected the decline in prices in related domestic industries,” Dong said of the PPI data.
The deflationary run is due in part to a recent slump in oil prices, wrote Zichun Huang and Julian Evans-Pritchard of Capital Economics in a note on Friday.
But, they added, “we suspect that overcapacity in Chinese industry continued to put downward pressure on factory-gate prices too”.
China’s exports rose last month despite the trade war, official data showed Friday, an unexpected development attributed by experts to a re-routing of trade to Southeast Asia to mitigate US tariffs.
The trade figures from the Chinese customs bureau showed that while exports to the US dropped sharply in April, those to Thailand, Indonesia and Vietnam surged by double digits.
Chinese policymakers this week eased key monetary policy tools in a bid to ramp up domestic activity.
Those included cuts to a key interest rate and moves to lower the amount banks must hold in reserve in a bid to boost lending – adding to Beijing’s sweeping push since September to revitalise the economy.
