BEIJING – China’s consumer prices remained unchanged from a year earlier, ending a four-month streak of decline and easing deflationary pressures as the government launched efforts to contain excessive competition among businesses. The Consumer Price Index (CPI) held steady at 0.0%, surpassing expectations of a slight decline, signaling a halt in falling inflation for the second consecutive month.
Despite this stabilization in consumer prices, factory deflation persisted with the Producer Price Index (PPI) falling 3.6% for the 34th consecutive month, matching the previous decline. This ongoing deflation at the factory level reflects weak domestic demand and excess industrial capacity, which have intensified price wars harming corporate profits and wages.
The Chinese government’s campaign addresses “disorderly competition” in key industries, aiming to manage overcapacity that has fueled destructive rivalry and declining wages, a phenomenon described as “involution”—a state of intense competition with diminishing returns. Nevertheless, this campaign has yet to shift public expectations significantly, with the price expectation index declining since late 2024, and the GDP deflator falling for nine straight quarters, the longest such stretch in many years.
Export resilience amid tariffs has somewhat buoyed the economy, yet domestic consumption remains fragile, pressured by a prolonged housing slump and muted household spending power. Policymakers recognize that addressing disorderly competition is vital to combating deflation, but more vigorous measures may be needed to stimulate domestic demand effectively.
In summary, while consumer price stability in July offers a positive sign, China’s broader economy faces enduring deflationary challenges shaped by intense internal competition, weak spending, and global trade tensions, prompting ongoing government efforts to recalibrate industry dynamics and revive growth.