China’s Consumer Spending Decline and Economic Outlook
China’s consumer spending is declining, leading to fears of deflation. February’s CPI fell by 0.7%, larger than anticipated, as trade war tensions mount. Government aims for a 2% inflation rate and around 5% growth this year, though many see these targets as ambitious under current economic pressures.
The consumer spending landscape in China continues to deteriorate post-pandemic, raising concerns of a deflationary trend. The slump coincides with President Trump’s extensive tariffs on Chinese imports enacted since January and the subsequent retaliatory tariffs imposed by Beijing on U.S. agricultural products set to take effect soon. Experts suggest that this ongoing trade war diminishes China’s reliance on export-driven economic growth, which previously saw record highs last year.
Recent statistics from the National Bureau of Statistics indicate a 0.7 percent decline in the Consumer Price Index (CPI) for February year-on-year, a more significant drop than the 0.4 percent decline anticipated in a Bloomberg survey. This decline is a reversal from January’s increase of 0.5 percent, primarily influenced by the timing of the Lunar New Year and international commodity price fluctuations, as noted by NBS representative Dong Lijuan.
Amid the findings, government officials in Beijing are currently convening for the crucial ‘Two Sessions’ political gathering. During this period, officials declared a target inflation rate of two percent for the year and expressed intentions to invigorate consumer spending. Zhiwei Zhang, Chief Economist at Pinpoint Asset Management, highlighted ongoing deflationary pressures, advocating for more proactive fiscal policies amid weak domestic demand and potential export risks linked to the trade conflict.
Despite the challenges, China’s exports realized a nominal growth of 2.3 percent year-on-year in the early months of 2025, contrasting starkly with the accelerated 10.7 percent growth observed last December. In a recent address at the ‘Two Sessions’, Premier Li Qiang projected a growth target of “around five percent” for the year ahead, mirroring the preceding year’s goal, although economists regard this aspiration as overly optimistic given the current economic headwinds.
In summary, China’s consumer spending is experiencing a notable decline, intensified by tariffs and trade wars. The February CPI figures reflect these pressures, as government efforts to boost economic activity set ambitious inflation and growth targets. However, analysts remain cautious about the feasibility of these objectives, given the prevailing economic challenges and the potential consequences of renewed trade tensions with the United States.
Original Source: m.economictimes.com
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