Consumer deflation in China is deepened as demand remains low despite the stimulus

China consumer prices have dropped for a fourth consecutive month in May, while Beijing Stimulation measurements seem insufficient to stimulate domestic consumption, price wars in the automotive sector adding to downward pressure.

The consumer price index fell 0.1% compared to the previous year, according to National Bureau of Statistics Data published MondayCompared to the median estimate of a drop of 0.2% among the analysts questioned by Reuters.

The CPI slipped into a negative territory In February, a drop of 0.7% compared to a year ago and continued to display a 0.1% drop in annual shift in March and April.

Basic inflation, excluding food and energy prices, however increased by 0.6% in May – the highest since January of this year, according to Wind Information.

In addition, deflation of the country’s prices or producers of the country has deepened, Decrease 3.3% over one year Earlier in May, a clear drop than analysts’ expectations for a decrease of 3.2%. The wholesale prices have remained in deflationary territory since October 2022, according to LSEG data.

Aside from the demand for constant and constant consumption, a deadly price war in the automotive industry has maintained the lower prices, said Zhiwei Zhang, president and chief economist at Pinpoint Asset Management.

Chinese decision -makers have urged the automotive industry to Stop brutal price warsThis had affected the profitability and efficiency of companies, which dropped prices.

“The price war in the automotive sector is another signal of fierce competition that has dropped prices,” said Zhang, adding that the drop in real estate prices has also contributed to the downward pressure of consumer prices.

While exports have been held strong, “finally China must rely on domestic demand to combat deflation,” added Zhang.

On May 7, the main Chinese financial regulators sparked a burst of political measures aimed at strengthening the country’s economy with a price. The Chinese central bank cut the Key interest rate of 10 basic points At the historic levels and reduces the ratio of reserve needs, which determines the amount of cash banks must hold in the reserves, by 50 base points.

President Donald Trump had increased prices on Chinese products at 145%prohibitive levels, which prompted Beijing to retaliate with tasks and other restrictive measures, such as export controls on his critical minerals.

On May 12, the economy obtained relief after the United States and China concluded a preliminary agreement in Geneva, Switzerland, which led both parties to abandon the majority of prices. Washington lowered its samples from Chinese products at 51.1% while Beijing abandoned taxes on American imports at 32.6%, according to Think Tank Peterson Institute for the International Economyallowing a place for both sides to negotiate a wider agreement.

Chinese Deputy Prime Minister and representative of main trade, He Lifeng should meet the American commercial negotiation team led by Secretary of the Treasury Scott Bessent in London Later in the day for renewed commercial negotiations.

The second round of the meetings comes after tensions again ruled out between the two parties, as they accused themselves of raping the Geneva Agreement.

Washington had blamed Beijing for slowly walking his commitment to approve the export of additional critical minerals to the United States, while China criticized the American decision to impose new restrictions on Chinese student visas and additional export restrictions on flea.

The Chinese trade ministry said on Saturday that it continue to examine and approve Applications for the export of rare earths, citing an increasing demand for robotics minerals and new sectors of energy vehicles.

While the temporary commercial truce with the United States seemed trembling, the markets are watching if Beijing will deploy more monetary relaxation to stimulate the economy.

In an article published last week, Journal of securities of the Chinese media managed by the State said the PBOC could reduce the RRR later this year to support growth, and could soon end a break of several months on the negotiation of public bonds. The central bank had Package of break in January in January In an attempt to limit diving bond yields and a weakened currency.

The eyes will be on the Lujiazui annual forum which will be held later this month in Shanghai, where the main financial regulators of China, including the governor of the PBOC, Pan Gongsheng, pronounce linked speeches. Shanghai government officials told journalists last month This major financial policy will be revealed to the forum.

China should also report its commercial data for May later Monday, which should show that exports increased by 5% over a year while imports dropped by 0.9% compared to the previous year, according to a reuters survey.

– Evelyn Cheng de CNBC contributed to this story.