In China, the tendency of deflation in consumer and producer prices continued. Consequently, the increase in consumer prices has remained close to zero for 18 months. The decline in producer prices has extended to 24 months. The stagnation in consumer prices and the ongoing decrease in producer prices in China continued in September. The National Bureau of Statistics of China released the data on price increases in the country for September 2024. According to the data, the Consumer Price Index (CPI) rose by 0.4 percent compared to the same period last year, while the Producer Price Index (PPI) decreased by 2.8 percent. The deflation trend persisted in September with the stagnation in consumer prices and the ongoing decrease in producer prices. CONSUMER PRICES CLOSE TO ZERO FOR 18 MONTHS The Consumer Price Index (CPI), considered as the main indicator of inflation, has remained below 1 percent since February 2023. The CPI recorded its fastest annual decline since September 2009, falling by 0.8 percent in January this year. With increased spending during the Spring Festival holiday period, the index, which rose by 0.7 percent for the first time in six months in February, increased by 0.1 percent in March, 0.3 percent in April, 0.3 percent in May, 0.2 percent in June, 0.5 percent in July, and 0.6 percent in August. Analysts point out that the stagnation in the CPI has led to ongoing deflation concerns. PRODUCER PRICES HAVE BEEN DECLINING FOR 24 MONTHS The decline recorded in producer prices since October 2022 continued in September. The Producer Price Index (PPI) for manufactured goods calculated from factory gate prices decreased by 2.8 percent. The decline in PPI observed in the last quarter of 2022 continued throughout 2023. Producer prices decreased by 2.5 percent in January of this year, 2.7 percent in February, 2.8 percent in March, 2.5 percent in April, 1.4 percent in May, 0.8 percent in June, 0.8 percent in July, and 1.8 percent in August. Weak domestic demand, local government debt risks, and the decline in the real estate sector continue to negatively impact the growth of China, the world’s second-largest economy. In a period where inflation has been high, especially in developed economies around the world after the Covid-19 pandemic, a reverse trend is seen to be entrenched in China. EXPECTATIONS FOR ECONOMIC REVIVAL In recent weeks, the Beijing administration has taken some steps to revitalize the economy in line with market expectations. The People’s Bank of China (PBoC) announced policy measures ranging from interest rate cuts on reverse repos to reductions in the required reserve ratios and lowering housing loan interest rates and minimum down payments on September 24. Following the announcement of the bank’s measures, there was a sudden rise in the stock markets. However, the investment plans of the National Development and Reform Commission, the main planning body, failing to meet expectations led to renewed selling in the markets. Analysts predict that the downward trend in the markets will continue due to the Finance Ministry’s budget adjustments falling short of expectations announced yesterday.