China’s economy continues to struggle as residents’ consumption remains insufficient, hindering economic recovery. Recently, 27 provinces in China have lowered their target for the Consumer Price Index (CPI) from 3% to 2%. Experts point out that stimulating consumer spending and boosting domestic demand face challenges, leading to overall production and consumption contraction. China’s economy is now facing unprecedented severe conditions.
Moreover, a research report by Citic Securities stated that under a neutral scenario, the average values for CPI and Producer Price Index (PPI) in 2025 are expected to be 0.3% and -1.4%, respectively.
On January 9th, the National Bureau of Statistics of the Communist Party of China released data showing that due to ongoing weak domestic demand, the CPI for the entire year of 2024 only rose by 0.2%, remaining unchanged from the same period in 2023 and far below the official target of around 3% for 2024. In 2024, the nationwide Producer Price Index (PPI) decreased by 2.2% year-on-year.
By January 20th, the People’s Congress of 31 provinces in 2025 had all commenced, with all provinces except Yunnan setting targets for resident price increases in their government work reports. Tibet maintained its previous target of within 3%, Hunan proposed consistency with the national level, and Shandong suggested maintaining resident consumption prices at a reasonable level. The remaining 27 provinces set this target at around 2%.
On January 20th, Sun Guoxiang, Associate Professor of International Affairs and Business at Taiwan’s Nanhua University, expressed to the Epoch Times that the adjustment of the CPI target to around 2% by various provinces in China reflects some observations and policy intentions regarding the current economic and inflation situation.
Sun stated, “Lowering the CPI target indicates that local governments in China are concerned about low inflation (or even possible deflation) conditions. By lowering the target, they avoid setting excessively high inflation goals that could create confidence issues. The lower target may also reflect local governments’ desire to reduce expected management risks due to non-achievement of targets. The downward adjustment indirectly indicates that stimulating consumer spending and boosting domestic demand are still policy priorities, but achieving this goal faces challenges.”
Sun Guoxiang believes that aside from weak demand, structural issues on the supply side, such as excess production capacity pressure, rising costs, and price pressure, also exert a restraining effect on the PPI and CPI. He concluded, “The adjustment of the CPI target indicates that while current Chinese economic growth remains positive, significant challenges such as insufficient domestic demand and weak price pressures still exist.”
Columnist Wang He from the Epoch Times stated that China’s economy is experiencing a significant downturn, with people reluctant to consume, making it impossible for the CPI growth to reach 3%. For the vast majority of provinces nationwide, even achieving 2% is unattainable. In 2024, the national CPI only grew by 0.2%, indicating stagnant price levels.
“Widespread insufficient consumption leads to stagnant economic growth and the potential for deflation, which is a very troublesome situation,” Wang expressed. “Negative growth in PPI significantly impacts China’s economic development. Under these circumstances, production and consumption are under intense pressure. These are unprecedented challenges for the Chinese economy.”
Wang He pointed out, “To put it simply, this year is the worst in the past decade, but it may turn out to be the best in the next decade. The overall trend of China’s economy is declining. Therefore, various contradictions will intensify, and the domestic and international economic situations, especially the international economic environment, will become increasingly severe. A poor economy will lead to significant employment problems for the general public, and the economic policies implemented by the Chinese authorities are essentially ineffective.”
According to Citic Securities’ research report, under optimistic, neutral, and pessimistic scenarios, the average CPI values for 2025 are expected to be 1.1%, 0.3%, and -0.6%, respectively, while the PPI averages are forecasted to be -0.8%, -1.4%, and -2.1%.
Regarding the operation status of the CPI and PPI in 2024 and the analysis of the inflation situation in 2025, Citic Securities’ research report concluded:
1. The current “low inflation” involves a wider range of industries and economic sectors. It presents distinctive characteristics different from previous price cycles, such as “significant deviation between quantity and price,” “weak pressure on CPI due to insufficient consumer demand,” “stabilization and reduction of third industry indexes,” and “weak prices in both domestic and foreign demand sectors.”
2. In 2024, factors that dragged down the CPI primarily include durable consumer goods, rental housing prices, and certain fresh food prices related to food chains (with beef as a representative). Meanwhile, the factors dragging down the PPI mainly involve black industry sectors closely related to real estate construction and “significant supply-demand mismatches” in the midstream equipment manufacturing industry.
3. The sustained recovery of core CPI in 2025 depends on substantial improvement in consumer demand, while PPI turning positive may require more extensive supply-side policy support. Under a neutral scenario, it is expected that the average values for CPI and PPI will be 0.3% and -1.4%, respectively. In terms of macroeconomic operation, “consumer stimulation” and “export competition” have driven a substantial increase in growth rates in the fourth quarter of 2024.