By Hasan Muhammad

 

 

China's consumer inflation continues to sputter, with December revealing an incremental 0.1 percent year-on-year rise, a downtick from November’s 0.2 percent increase. This signal of subdued domestic demand amplifies calls from economists for assertive countercyclical measures to reignite consumption and revitalize the broader economy. 

 

Economic analysts foresee 2025 bringing modest gains in consumer prices, underpinned by meticulously calibrated initiatives to bolster household spending. A suite of gradual policy measures, aimed at reversing the inertia plaguing consumption, is anticipated to be a central pillar of this effort. Complementing this approach, expectations are high for a substantial rate cut - potentially the sharpest since 2015 - which could play a pivotal role in sustaining the recovery in demand. 

 

For a nation often praised for its economic adaptability, the months ahead will test China’s resolve to overcome these entrenched challenges and chart a more robust economic trajectory. China’s economic pulse revealed mixed signals in December, with the consumer price index (CPI) creeping upward by a mere 0.2 percent for nonfood items, while the producer price index (PPI) extended its prolonged descent, marking a 2.3 percent year-on-year decline. These figures underscore the delicate balance Beijing faces as it seeks to stabilize its economy amid stubborn structural challenges.

 

For Beijing, the task ahead is formidable - crafting policy solutions that address systemic weaknesses while fostering a renewed sense of confidence in households and businesses. January is expected to bring a modest narrowing of the producer price index (PPI) decline to around 2.1 percent, driven largely by a low comparison base and heightened macroeconomic support. Simultaneously, consumer price index (CPI) growth may reach 1 percent year-on-year, buoyed by surging demand during the earlier-than-usual Spring Festival holiday. 

 

NBS data reveal that core CPI - excluding volatile food and energy prices - rose 0.4 percent in December, an incremental improvement from November’s 0.3 percent gain. This marks a tenuous yet encouraging trend, reflecting the efficacy of a patchwork of policy measures aimed at spurring demand. The GDP deflator, a comprehensive measure of price changes in the economy, is poised to remain in negative territory for the seventh consecutive quarter, highlighting persistent deflationary pressures.

 

At its core, China’s challenge lies in bridging its macroeconomic ambitions with entrenched structural issues. Policymakers are doubling down on countercyclical measures, with a clear focus on stabilizing market expectations and reigniting economic momentum. This call for bolstered macroeconomic policy adjustments underscores the urgency to promote a reasonable recovery in prices - a primary aim of the central bank’s continued accommodative stance.

 

Coupled with proactive fiscal measures and targeted interventions, the government hopes to reinvigorate consumer spending and expand domestic demand. These strategies aren’t just about keeping the economy afloat; they’re aimed at fostering sustainable, internally driven growth. Looking toward 2025, economists anticipate accelerated CPI growth, spurred by carefully calibrated policies designed to address lingering weaknesses.