China: Inflation dips below 0 first time in 13 months
What's the story
In a major economic development, China's consumer inflation has dipped below zero.
According to the National Bureau of Statistics, the Consumer Price Index (CPI) fell 0.7% from a year ago, as opposed to a 0.5% gain in the previous month.
The decline was steeper than economists' median forecast of a 0.4% drop and is the first deflation for China in 13 months.
PPI trends
Producer Price Index also sees slower drop
The Producer Price Index (PPI) has now been in deflation for 29 months in a row.
However, the latest data indicates a slower drop of 2.2% as compared to January's negative 2.3%.
This indicates that while deflationary pressures continue to linger in China's economy, they are not persisting at the same pace as before.
Statistical impact
High base effect from last year impacts inflation
The sharp decline in inflation can be attributed to the high base effect from last year.
This was due to elevated prices caused by spending during the Lunar New Year, which had an earlier-than-usual start this year.
The festival, which fell entirely in February 2024, took place from January 28 to February 4 in 2025.
Economic strategy
Inflation target set at lowest level in 20 years
China has set its 2025 inflation target at the lowest in over two decades, targeting around 2% consumer-price growth.
This is a reduction from the previous target of 3%, showing that top leaders are recognizing deflationary pressures on the world's second-largest economy.
For example, consumer inflation has been stuck at just 0.2% for the past two years.
Growth targets
Ambitious growth goal amid economic challenges
Despite the threat of an intensifying trade war with the US, China has set an ambitious economic growth target of about 5% for 2025.
The government also plans to boost fiscal stimulus and domestic consumption in the face of these challenges, reflecting a proactive approach toward stimulating economic activity amid external pressures.