China’s price increase hits 15-year low in 2024

Data released by the National Bureau of Statistics of China on January 9 showed that the consumer price index (CPI) in 2024 rose by 0.2% over the previous year. The “core index excluding food and energy”, which shows price trends, rose by 0.5%, the lowest growth rate since 2009. Deflationary pressure is increasing.

The increase in the comprehensive index is the same as in 2023. The long-term real estate downturn continues to cause insufficient demand, especially the shrinking sales of durable consumer goods. By product category, automobiles and motorcycles fell by 5.1%. The low-price competition for automobiles is becoming increasingly fierce, and the decline has widened compared with 2023.

Furniture and home appliances, which are often replaced when buying a new house, also fell by 1.6%. Due to the sluggish housing sales, prices are prone to downward pressure, and the decline has widened compared with 2023. Communication equipment such as smartphones also fell by 1.7%.

The background is that due to unstable employment, households are more willing to save. In addition to food and energy, the core index that is considered to reflect household purchasing power showed negative growth in 2009, and 2024 was the lowest since 2009. It hovered around 0.5% to over 1% in the first half of 2024, but slowed down to 0-0.5% in the second half of the year.

As one of the economic operation guidelines for 2025, the Chinese government will focus on expanding domestic demand. The National Development and Reform Commission, which is responsible for economic policy, announced that it will implement subsidies for the purchase of new mobile phones and tablets. Mobile phones priced below 6,000 yuan can receive a 15% subsidy.

Microwave ovens, dishwashers, rice cookers, etc. will also be included in the subsidy. The purpose is to promote replacement and restore domestic demand by expanding the subsidy system, but there is also a view that this will only lead to an overdraft of demand.