In July, China's national consumer price index (CPI) remained unchanged year-on-year, with a month on month increase of 0.4% instead of a 0.1% decrease from the previous month.

The national Producer Price Index (PPI) for industrial production in China in July decreased by 3.6% year-on-year, with a larger decline than expected; The national consumer price index (CPI) remained unchanged year-on-year. Experts and scholars believe that the Chinese economy has yet to break free from deflationary pressure and the vicious cycle of "involution", and the continued uncertainty of US tariff policies is one of the sources of economic risks for China.

China's PPI has recorded negative growth for 34 consecutive months since October 2022. Deflationary pressure has prompted officials to take measures to address overcapacity and vicious competition caused by internal competition; Due to the price war eroding corporate profits, wages have been lowered, which has also impacted residents' willingness to consume.

The National Bureau of Statistics of China announced on Saturday (August 9th) that PPI in July decreased by 3.6% year-on-year, the same decrease as last month. Reuters reported that the decline is greater than the 3.3% previously predicted by economists. On a month on month basis, PPI decreased by 0.2% in July, narrowing the decline by 0.2 percentage points compared to the previous month.

The month on month CPI in July changed from a decrease of 0.1% last month to an increase of 0.4%, while it remained unchanged year-on-year. The core CPI, which excludes food and energy prices, increased by 0.8% year-on-year, with the growth rate expanding for three consecutive months.

Dong Lijuan, Chief Statistician of the Urban Department of the National Bureau of Statistics of China, analyzed that seasonal factors combined with the uncertainty of the international trade environment have affected the price decline of some industries, and the increase in hot and rainy weather in summer has slowed down the progress of construction projects, affecting the demand for building materials and the decrease in electricity prices. These are the main reasons for the month on month change in PPI in July.

The month on month increase in CPI is mainly driven by the rise in prices of services and industrial consumer goods. Among them, due to the impact of the peak summer travel season, the prices of plane tickets, tourism, hotel accommodation, and transportation rental fees have all increased higher than seasonal levels.

CPI and PPI are indicators for measuring whether the economy is facing deflationary pressure. When two indicators continue to decline, it indicates the risk of deflation in the economy. Some analysts and scholars believe that although the latest CPI remained unchanged year-on-year, it is still too early to determine whether the Chinese economy has escaped deflationary pressure.

Reuters quoted Zhang Zhiwei, Chief Economist of Bank of China Investment, as analyzing that the Chinese real estate market is not yet stable, the economy still relies mainly on external demand rather than domestic consumption, and the labor market is still weak. It is currently difficult to say whether China's deflation has ended.

Fu Fangjian, associate professor of Li Guangqian School of Business, Singapore Management University, analyzed to the Lianhe Zaobao that the latest CPI is still low, which shows that China's economy has not completely shaken off the pressure of deflation, and there is still room for policies such as "old for new" to boost domestic demand; Investing in large-scale projects such as the Yajiang hydropower station can help drive demand for raw materials and cement building materials, which is beneficial for increasing PPI.

Fu Fangjian also pointed out that the key to boosting consumption is to increase the income of workers. He judged that from now until the end of the year, the authorities will not introduce too many new measures, but are more likely to focus on established policies such as elderly care and childcare, small and medium-sized enterprises paying social security for employees, and revitalizing more existing housing to release wealth effects by stabilizing the real estate market.

Bloomberg also quoted Zhu Yi, Senior Economist for Bloomberg Asia Pacific, as saying, "The overall situation will not change, and the economy still has a long way to go to get rid of deflationary pressure." However, he believes that decision-makers have realized that regulating disorderly competition is the key to solving the root cause of deflation, and more measures may be taken in the future.

The meeting of the Political Bureau of the Communist Party of China held on July 30th has made it clear to promote the continuous optimization of market competition order and to govern disorderly competition among enterprises in accordance with laws and regulations. On July 17th, the front page article of the People's Daily, the official newspaper of the Central Committee of the Communist Party of China, revealed that General Secretary Xi Jinping questioned the necessity of local governments clustering together to develop emerging industries such as new energy and artificial intelligence during his speech at the Central Urban Work Conference of the Communist Party of China on July 14th.

According to Fu Fangjian's analysis, judging from the latest data, Chinese companies have definitely not yet emerged from the vicious cycle of "internal competition". The "anti internal competition" policy is expected to start from the supply side reform. Taking new energy vehicles as an example, it is believed that some companies will be acquired in the second half of the year. After the implementation of the "anti involution" policy, supply side prices and consumer prices can be increased, and "PPI and CPI will rise slightly".

Xie Dongming, the head of Asia Research and Strategy at OCBC Bank, analyzed to this newspaper that China's July PPI was lower than market expectations, which may be due to a time lag issue, as many commodity prices have actually started to recover since late July, but have not yet been reflected in the July PPI.

He judged that as the "anti involution" measures take effect, PPI related prices will gradually rise, and China's inflation data will also slowly rise.

According to Interface News, Wu Chaoming, Chief Economist of Caixin Financial Holdings, believes that China's exports will face downward pressure due to the impact of US tariffs, coupled with overcapacity pressure in related industries, and the risk of price decline in export industries is relatively high. It will be difficult for China's PPI to turn positive this year.

In July, China's national consumer price index (CPI) remained unchanged year-on-year, with a month on month increase of 0.4% instead of a 0.1% decrease from the previous month.

The national Producer Price Index (PPI) for industrial production in China in July decreased by 3.6% year-on-year, with a larger decline than expected; The national consumer price index (CPI) remained unchanged year-on-year. Experts and scholars believe that the Chinese economy has yet to break free from deflationary pressure and the vicious cycle of "involution", and the continued uncertainty of US tariff policies is one of the sources of economic risks for China.

China's PPI has recorded negative growth for 34 consecutive months since October 2022. Deflationary pressure has prompted officials to take measures to address overcapacity and vicious competition caused by internal competition; Due to the price war eroding corporate profits, wages have been lowered, which has also impacted residents' willingness to consume.

The National Bureau of Statistics of China announced on Saturday (August 9th) that PPI in July decreased by 3.6% year-on-year, the same decrease as last month. Reuters reported that the decline is greater than the 3.3% previously predicted by economists. On a month on month basis, PPI decreased by 0.2% in July, narrowing the decline by 0.2 percentage points compared to the previous month.

The month on month CPI in July changed from a decrease of 0.1% last month to an increase of 0.4%, while it remained unchanged year-on-year. The core CPI, which excludes food and energy prices, increased by 0.8% year-on-year, with the growth rate expanding for three consecutive months.

Dong Lijuan, Chief Statistician of the Urban Department of the National Bureau of Statistics of China, analyzed that seasonal factors combined with the uncertainty of the international trade environment have affected the price decline of some industries, and the increase in hot and rainy weather in summer has slowed down the progress of construction projects, affecting the demand for building materials and the decrease in electricity prices. These are the main reasons for the month on month change in PPI in July.

The month on month increase in CPI is mainly driven by the rise in prices of services and industrial consumer goods. Among them, due to the impact of the peak summer travel season, the prices of plane tickets, tourism, hotel accommodation, and transportation rental fees have all increased higher than seasonal levels.

CPI and PPI are indicators for measuring whether the economy is facing deflationary pressure. When two indicators continue to decline, it indicates the risk of deflation in the economy. Some analysts and scholars believe that although the latest CPI remained unchanged year-on-year, it is still too early to determine whether the Chinese economy has escaped deflationary pressure.

Reuters quoted Zhang Zhiwei, Chief Economist of Bank of China Investment, as analyzing that the Chinese real estate market is not yet stable, the economy still relies mainly on external demand rather than domestic consumption, and the labor market is still weak. It is currently difficult to say whether China's deflation has ended.

Fu Fangjian, associate professor of Li Guangqian School of Business, Singapore Management University, analyzed to the Lianhe Zaobao that the latest CPI is still low, which shows that China's economy has not completely shaken off the pressure of deflation, and there is still room for policies such as "old for new" to boost domestic demand; Investing in large-scale projects such as the Yajiang hydropower station can help drive demand for raw materials and cement building materials, which is beneficial for increasing PPI.

Fu Fangjian also pointed out that the key to boosting consumption is to increase the income of workers. He judged that from now until the end of the year, the authorities will not introduce too many new measures, but are more likely to focus on established policies such as elderly care and childcare, small and medium-sized enterprises paying social security for employees, and revitalizing more existing housing to release wealth effects by stabilizing the real estate market.

Bloomberg also quoted Zhu Yi, Senior Economist for Bloomberg Asia Pacific, as saying, "The overall situation will not change, and the economy still has a long way to go to get rid of deflationary pressure." However, he believes that decision-makers have realized that regulating disorderly competition is the key to solving the root cause of deflation, and more measures may be taken in the future.

The meeting of the Political Bureau of the Communist Party of China held on July 30th has made it clear to promote the continuous optimization of market competition order and to govern disorderly competition among enterprises in accordance with laws and regulations. On July 17th, the front page article of the People's Daily, the official newspaper of the Central Committee of the Communist Party of China, revealed that General Secretary Xi Jinping questioned the necessity of local governments clustering together to develop emerging industries such as new energy and artificial intelligence during his speech at the Central Urban Work Conference of the Communist Party of China on July 14th.

According to Fu Fangjian's analysis, judging from the latest data, Chinese companies have definitely not yet emerged from the vicious cycle of "internal competition". The "anti internal competition" policy is expected to start from the supply side reform. Taking new energy vehicles as an example, it is believed that some companies will be acquired in the second half of the year. After the implementation of the "anti involution" policy, supply side prices and consumer prices can be increased, and "PPI and CPI will rise slightly".

Xie Dongming, the head of Asia Research and Strategy at OCBC Bank, analyzed to this newspaper that China's July PPI was lower than market expectations, which may be due to a time lag issue, as many commodity prices have actually started to recover since late July, but have not yet been reflected in the July PPI.

He judged that as the "anti involution" measures take effect, PPI related prices will gradually rise, and China's inflation data will also slowly rise.

According to Interface News, Wu Chaoming, Chief Economist of Caixin Financial Holdings, believes that China's exports will face downward pressure due to the impact of US tariffs, coupled with overcapacity pressure in related industries, and the risk of price decline in export industries is relatively high. It will be difficult for China's PPI to turn positive this year.