China reported on Saturday that consumer prices declined in April for the third month in a row, highlighting the persistent economic challenges facing the country amid weak spending and an ongoing trade war with the United States.
Deflationary pressures have weighed on the world’s second-largest economy in recent years, with a struggling property sector and falling exports continuing to drag on growth.
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The figures were released just ahead of a high-level meeting between Chinese and U.S. economic officials in Switzerland on Saturday, which could offer a potential path to ease the trade tensions first ignited under President Donald Trump.
US tariffs on imports from manufacturing powerhouse China now stand at a staggering 145 percent for many products — and reach as high as 245 percent cumulatively on others.
Trump suggested Friday that the tariffs could be cut to 80 percent, 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 percent last month year-on-year, according to data released Saturday 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 percent year-on-year decline based on a survey of economists, and consistent with the slight drop recorded in March.
NBS statistician Dong Lijuan said Saturday 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”.
– ‘Downward pressure’ –
The National Bureau of Statistics (NBS) announced Saturday that China’s producer price index (PPI) fell 2.7 percent year-on-year in April, a sharper decline than the 2.5 percent drop recorded in March and in line with forecasts.
China’s PPI has remained in negative territory for over two years, reflecting ongoing deflationary pressure in the industrial sector.
“Changes in the international trade environment and a rapid decline in some international bulk commodity prices have contributed to falling prices in related domestic industries,” said NBS official Dong, commenting on the PPI figures.
Analysts Zichun Huang and Julian Evans-Pritchard of Capital Economics noted on Friday that the continued slump is partly driven by lower oil prices. However, they also pointed to industrial overcapacity in China as another factor dragging down factory-gate prices.
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Despite the trade war, China’s exports rose in April, official data showed Friday—an unexpected outcome that experts attribute to the re-routing of trade through Southeast Asia to circumvent U.S. tariffs.
The trade figures from the Chinese customs bureau showed that while exports to the United States 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.