In China, core inflation has fallen to a level that is the lowest in more than three years, amid which calls have begun to spread for increased efforts to boost household spending.

Currently, the mentioned Asian country is facing such a problem as weak demand. The corresponding state of affairs is a threat from the perspective of China’s prospects of achieving an economic growth target of about 5% in 2024. In the relevant context, calls for an increase in consumer spending are logical steps towards the mentioned goal.

The consumer price index, which does not take into account volatile energy and food prices, showed growth in China in August, which amounted to 0.3% compared with the result for the same period last year. It is worth noting that this indicator is the lowest since March 2021. Information about the dynamic of the consumer price index in China in August was released by the National Bureau of Statistics (NBS) on Monday, September 9.

The broader consumer price index in the Asian country rose 0.6% year-on-year last month. This indicator was buoyed by the rise in food prices due to bad weather in August.

The statistical information released on Monday is further evidence that China’s economic system, which is the second largest in the world, is currently facing the problem of weak consumer demand. The corresponding state of affairs encourages Beijing, as a political center, to take measures to prevent a negative cycle of declining corporate revenue, wages, and spending.

Michelle Lam, Greater China economist at Societe Generale, says deflationary pressures are currently increasing in the Asian country. According to the expert, the corresponding situation may contribute to a downward price-wage spiral. The economist noted that the implementation of such a scenario for Beijing would mean the need to take more radical political measures.

China’s CSI 300 Index is currently on a downward trajectory, continuing to move along the symbolic road of consecutive decline indicators. On Monday, the index ended the morning session decreasing by 1.1%.

The onshore benchmark is currently on the verge of falling to a five-year low. The corresponding dynamic is because the so-called bearish sentiment continues to be observed, being the result of factors such as the lack of earnings and economic recovery.

The yuan faced small losses in both onshore and overseas trading. The yield on China’s 10-year government bonds practically showed no change. The corresponding indicator is at around 2.13% which is very close to an all-time low.

Currently, the world’s second-largest economy is experiencing the longest price decline in the last 25 years. This is evidenced by the gross domestic product deflator, a measure of economy-wide prices.

Weak consumer demand and a low level of investor interest have led to a kind of price war in sectors such as solar energy and electric vehicles in China. Against this background, it is less likely that Beijing will be able to achieve its economic growth target in the current year.

Currently, the practice of delaying purchases is common among buyers in China. At the same time, businesses slash wages.

Official statistics show that car prices in China have fallen by an average of 5.5% this year. At the same time, the average cost of telephones and other communication equipment decreased by 2.1%.

Zhiwei Zhang, chief economist at Pinpoint Asset Management, says that China’s fiscal policy should become more proactive to prevent deflationary expectations from becoming entrenched.

Dong Lijuan, chief NBS statistician, says that the moderate increase in consumer prices is associated with hot weather and heavy rainfall.

The former governor of the People’s Bank of China, Yi Gang, last week called on policymakers to immediately begin fighting deflationary pressures. It is worth noting that in this case there is a rare example of how a prominent Chinese figure actually recognized that the country is countering the problem of falling prices. Yi Gang made the corresponding statement at the Bund Summit in Shanghai.

As we have reported earlier, China’s Economy Fails to Rebound.