China on brink of deflation as prices plunge

Duncan Wrigley, chief China economist at Pantheon Macroeconomics, said: “Insipid consumer inflation is an indication of the soggy consumer spending recovery, especially for goods, as well as excess production capacity.”

Several of China’s internet giants reported disappointing sales figures at a major shopping event earlier this month, dashing hopes of a bounce back in demand after Covid restrictions were scrapped.

Low inflation and lacklustre growth means analysts are now sceptical that Beijing will hit its economic growth target of “around 5pc” for 2023. The economy grew by just 3pc in 2022 – one of the weakest rates in the country’s modern history.

Economists expect the People’s Bank of China (PBOC) to respond to the country’s tepid outlook with interest rate cuts to stimulate demand.

Analysts at Barclays said in a client note: “We…