In March, China’s consumer prices dipped by 0.1% compared to the same period last year, signaling continued deflationary trends after a 0.7% drop in February. According to a Reuters survey, analysts had anticipated no change from last year’s figures.
In a more severe development, producer prices decreased by 2.5% year-on-year, marking the steepest decline since November 2024 and maintaining a deflationary streak for the 29th month in a row. Expectations from economists polled by Reuters had set this figure at a 2.3% contraction.
Tensions on the trade front escalated as U.S. President Donald Trump hiked tariffs on Chinese imports to 125% overnight from 104%, with Beijing responding by imposing an 84% tariff on U.S. goods. This economic clash coincided with the release of pricing data, resulting in the onshore yuan depreciating to 7.35 against the dollar, while the CSI 300 index rose by 0.82%.
Previously, Chinese Premier Li Qiang emphasized the aim of stimulating domestic consumption in his annual government report, with the country focusing on the growth target of a bold “around 5%” in 2025.
Despite eschewing direct cash payouts like other nations, Chinese authorities have recognized the necessity of countering domestic deflationary pressures.
In a strategic move in March, Chinese policymakers have significantly increased subsidies for a consumer trade-in initiative, elevating the total to 300 billion yuan (approximately $41.47 billion) for the year. These funds will cover about 15% to 20% of the cost of selected items, including mid-range smartphones and home appliances. This expansion doubled last summer’s allocation of 150 billion yuan, which covered a more limited selection of products.
Nevertheless, as stated by officials, achieving growth goals involves significant challenges, increasingly complicated by intensified trade disputes between China and the United States.
