China's Consumer Prices Fall Again as Producer Deflation Worsens

China's consumer price index dropped 0.1% year over year, according to expectations from economists surveyed by Reuters, who had anticipated no change.
The producer prices declined for the 29 consecutive month, decreasing by 2.5% in March compared to the previous year, which is the most significant drop since November 2024.
Li Daokui, who holds the position of Mansfield Freeman Professor of Economics at Tsinghua University and previously served as an adviser for the People's Bank of China, thought that Beijing was preparing additional stimulus actions aimed at increasing internal spending. These measures were expected to be implemented within ten days.

In China, consumer prices fell for the second consecutive month, and producer price deflation deepened as Chinese exporters face increasing difficulties due to the intensifying trade conflict with the U.S.

Consumer price index slid 0.1% increase per year in March , continuing to be in deflationary territory following a contraction of 0.7% in February, as reported information provided by the National Statistics Bureau Thursday.

Economists surveyed by Reuters anticipated a result showing no change from the previous year.

The producer prices decreased for the 29th consecutive month, declining by 2.5%. in March of a previous year previously, indicating the biggest decrease since November 2024.

The Reuters survey anticipated a decrease of 2.3%.

Core inflation, excluding the fluctuating costs of food and energy, increased by 0.5% after falling by 0.1% in February; this figure remains below the 0.6% increase seen in January.

There’s an increased likelihood we’ll observe a separation between consumer prices and producer prices,” stated Tianchen Xu, a senior economist from the Economist Intelligence Unit. He further mentioned that although core consumer prices indicate some recovery, producer prices are expected to decline due to ongoing trade disruptions.

He noted that Chinese exporters are effectively vying for a reduced worldwide marketplace.

U.S. President Donald Trump increased tariffs on Chinese imports to 125% overnight, rising to 104%. Just hours before, China had responded with retaliation. imposing an 84% tariff on the U.S. on Wednesday.

Bruce Pang, an adjunct associate professor at the Chinese University of Hong Kong, stated that the data indicates a possible turning point caused by policy stimulation efforts, notably those focused on increasing consumer spending.

Pang stated that due to recent policy pledges to limit intense price reductions and new tactics aimed at boosting consumer expenditure, we can expect the CPI to show continued indications of a slow upturn over the next few months.

In addition, Pang mentioned that the downward pressure on producer prices is expected to continue due to the uncertainties around oil costs and external demand caused by continuing trade disputes.

After the data release, the onshore yuan stayed close to multidecade lows at 7.3469 against the dollar, having previously reached its lowest point since 2007 during the trading session. Meanwhile, the offshore yuan declined by 0.23%, reaching 7.3611 per dollar.

The CSI 300 in Mainland China gained 1.6%, whereas the Hang Seng Index in Hong Kong surged by 3.9%. a more extensive rebound in Asia markets.

In March, Chinese Premier Li Qiang had presented an yearly assessment of governmental operations those identifying increased consumer spending as their primary objective for the coming year, since the nation aimed for a robust growth rate of approximately 5%.

This marks the first occasion in ten years that Beijing has accorded consumption such significant importance, according to Laura Wang, who serves as the chief China equity strategist at Morgan Stanley. She further noted that the government work report mentioned "consumption" 27 times — more instances than in any year over the past decade.

Daokui Li, who serves as the Mansfield Freeman Professor of Economics at Tsinghua University and previously advised the People’s Bank of China, told 's "The China Connection" On Thursday, it was reported that Beijing was preparing additional stimulus measures aimed at enhancing domestic consumption, which are set to be implemented shortly.

As the U.S. imposes higher tariffs, "Beijing plans to intensify efforts to boost domestic consumption two-fold or possibly four times more than initially planned," according to Li. He anticipates that "In about 10 days, we will witness statements from the State Council regarding this matter."

To encourage local spending, Chinese policymakers in March Increased the subsidies for a customer trade-in initiative to 300 billion yuan ($41.47 billion) this year. These subsidies will cover approximately 15% to 20% of the cost for certain items such as mid-range mobile phones and household appliances.

This represents an extension of last year’s initiative, which was valued at 150 billion yuan and introduced during the summertime, focusing on a more limited selection of goods.

Given the potential for "new shocks" to impact external demand, China should concentrate more on stimulating internal consumption. This was stated by Shen Danyang, who leads both the drafting team of the Government Work Report and serves as the director of the State Council Research Office. He shared this insight with journalists in March during an interview conducted in Mandarin, according to translations provided by .

Chinese officials had said meeting the growth target would require "very arduous work," according to a translation of their statement in Chinese. The situation has been further complicated by heightened trade tensions between Beijing and Washington.

"Although policymakers have expressed readiness to take further steps to boost domestic demand, a significant portion of fiscal expenditure continues to focus on enhancing the economy’s supply-side capabilities," noted Julian Evans-Pritchard, who leads China economics analysis at Capital Economics, in a statement.

"It appears improbable that support for consumption will be adequate enough to completely counterbalance the decline in exports. Consequently, excess capacity is expected to increase further, intensifying the downward pressure on prices," according to Evans-Pritchard.

Evelyn Cheng also contributed to this report.