Chinese consumers are feeling a sense of “luxury shame,” reminiscent of what Americans went through during the 2008-2009 financial crisis. This shift is highlighted in a recent Bain and Company report.
In January, China’s consumer inflation was lower than expected. The Consumer Price Index (CPI) only increased by 0.2% year-on-year, less than the predicted 0.4%. This follows a stronger 0.8% rise in December, the highest in nearly three years. On a monthly basis, prices also grew by 0.2%. Meanwhile, the core CPI, which excludes food and energy prices, saw a 0.8% rise, down from 1.2% in December.
On the production side, the Producer Price Index (PPI) dropped by 1.4% compared to a year ago, slightly better than the forecasted 1.5% decline. However, on a monthly basis, it rose by 0.4%, marking a positive trend for the fourth consecutive month. Analysts noticed this uptick was partly due to rising global gold prices.
Zhiwei Zhang, an economist at Pinpoint Asset Management, shared insights on the challenge of interpreting these figures. With the Lunar New Year falling in mid-February this year, compared to January last year, the timing creates confusion in the data. Zavier Wong, a market analyst at eToro, supported this view, suggesting that it’s more insightful to look at January and February together instead of separately.
Manufacturers are still struggling with deflation in factory prices, which has persisted for over three years. This has impacted their profits, especially with weak consumer confidence and disruptions from U.S. trade policies. Despite these hurdles, China’s economy grew by 5% last year, thanks in part to solid export growth to non-U.S. markets.
Since the pandemic, China has faced ongoing deflationary pressures, driven by a slump in the property sector and uncertain job prospects. Authorities are trying to manage price wars across industries where excess supply has forced companies to lower prices.
Economists are watching closely. Chetan Ahya from Morgan Stanley noted that while China prefers investments as the primary growth driver, stimulus measures to boost consumption often lead to increased debt. This aligns with trends seen over the last couple of years, where China’s fiscal revenue-to-GDP ratio decreased and public debt rose significantly. By 2025, China’s debt-to-GDP ratio is projected to reach 116%, though still lower than the U.S. ratio of 124%.
As economic targets for the year are set during an upcoming parliamentary meeting, it’s clear that China’s policymakers are committed to maintaining “appropriately loose” monetary policies to help stabilize the economy and promote a steady recovery in prices.
For more on China’s current economic landscape, you can check out sources like the Wall Street Journal or government reports from the National Bureau of Statistics.
Source link
Asia Economy,Markets,Breaking News: Markets,Breaking News: Asia,business news
