China consumer prices in May fell for the fourth time this year

Today, China’s data from the National Bureau of Statistics (NBS) showed a 0.1% fall in consumer prices, increasing deflation worries. The country appears to have insufficient stimulus measures to boost domestic consumption, according to Zhiwei Zhang, President at Pinpoint Asset Management. The result is a fourth consecutive decline amid trump trade wars since the beginning of the year.

China’s median estimate, as polled by analysts, showed a 0.2% decline, considering price wars in the automotive industry, which added significantly to the downward pressure. The CPI dramatically dropped in February with a 0.7% decline and continued to fall by 0.1% in March and April.

China’s CPI index falls for the fourth time this year

In May, wholesale prices fell by 3.3%, marking the highest drop since July 2023 and a steep drop compared to the 3.2% analysts’ estimate from LSEG data. According to Wind information, the core inflation rate that excludes food and energy prices jumped by 0.6% in May, marking the highest since January this year. However, wholesale prices have remained in deflation since October 2022.

China May CPI m/m -0.2%, y/y -0.1%.

Stats bureau: core CPI m/m +0.1%, y/y +0.6% so not worse than before. True. It's bad headline CPI, but not necessarily worse than last month.

（統計侷說得看核心CPI。那你倒是做張核心通脹的圖一起放出來嘛。先謝謝統計局了。） pic.twitter.com/yIWlHd1hMH

— Liqian Ren (@liqian_ren) June 9, 2025

Zhiwei Zhang, President at Pinpoint Asset Management, revealed that the price war in the automotive industry has played a major role in keeping consumer prices weak. He added that falling property prices contributed to the downward pressure despite exports holding strong. He argued that the country will eventually depend on domestic consumer demand to fight deflation.

Policymakers have urged the automotive industry to end price wars, which are affecting businesses’ profitability and sustainability. The automotive sector ministry wrote on the official WeChat account that there are no winners in price wars, let alone the future. The ministry committed to collaborating with law enforcement agencies to combat unfair competition and vowed to protect consumers. The ministry will take regulatory measures to promote high-quality industry development. 

Coal mining, oil, and gas extraction firms experienced the biggest drop in prices, with 18.2% and 17.3% drops, respectively. Lijua Dong, NBS Chief Statistician, stressed the need for forceful and targeted stimulus measures to improve consumption.  China Securities Journal wrote that the People’s Bank of China (PBOC) may drop the Required Reserve Ratio (RRR) further this year to enhance growth and could end the pause on government bond trading. The Central Bank of China paused bond purchases in January to curb weakening currency and dropping bond yields. 

Trump tariffs hit China’s consumer prices by a 0.1% drop in May

U.S. President Donald Trump’s tariffs, which rose to 145%, prompted China’s top financial regulators to unveil policies to boost the country’s economy. China’s Central Bank reduced key interest rates by 10 basis points and lowered the reserve requirement ratio, determining the amount of cash banks must hold by 50 basis points.

He Lifeng, the Chinese Vice Premier and lead trade representative, is expected to meet with U.S. Treasury Secretary Scott Bessent in London today for renewed trade talks. Both countries struck a deal on May 12 in Geneva, Switzerland, that led both sides to drop tariffs. According to the Peterson Institute for International Economics, the U.S. reduced tariffs on Chinese goods to 51.1%, while China dropped levies on American imports to 32.6%.  

Trump accused China of violating the Geneva agreement by taking time to approve the export of additional minerals to the U.S.; at the same time, China blamed the U.S. decision to impose new restrictions on Chinese Student visas and further export restrictions. China’s Ministry of Commerce recently said it will proceed to review and approve the export of rare earth metals due to the massive demand from Robotics and the new electric vehicle sectors.

Lujiazui Forum is expected to be held this month in Shanghai, with keynote speakers expected to deliver their speeches.  PBOC Governor Pan Gongsheng, the top financial regulator, will be at the forum. According to an online poll, China will also report its trade data later today, which is expected to show a 5% increase Y/Y and a 0.9% fall in imports. 

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