China's price trend remains stable amid steady economic recovery

Editor's note: Liu Chunsheng, a special commentator on current affairs for CGTN, is an associate professor at the Beijing-based Central University of Finance and Economics. The article reflects the author's opinion and not necessarily the views of CGTN.

In January 2025, China's macroeconomy encountered its first crucial data window. The consumer price index (CPI) and producer price index (PPI) figures released by the National Bureau of Statistics on Sunday revealed a year-on-year increase of 0.5 percent and a month-on-month rise of 0.7 percent for the CPI, while the PPI experienced a year-on-year decrease of 2.3 percent and a month-on-month drop of 0.2 percent. The CPI's growth saw a rebound driven by the Spring Festival factor, and the PPI's decline remained steady. Overall, the stable price trend at the start of 2025 provides an important foundation for the healthy operation of the economy and offers sufficient space for macroeconomic policy adjustments.

The CPI is the key indicator of price changes in consumer goods and services. It reflects the price level of everyday items and services consumed by households. Historically, every year in January and February, particularly before and during the Spring Festival, the CPI tends to experience some seasonal fluctuations. The Spring Festival, as China's most important traditional holiday, is accompanied by a significant increase in consumption, especially in food and services.

Firstly, food consumption typically surges during the Spring Festival, with demand for traditional holiday ingredients such as pork, vegetables, and seafood increasing sharply. According to past seasonal trends, pork prices often rise ahead of the Spring Festival, which contribute to an upward trend in the CPI. Additionally, dining out, socializing, and travel during the holiday period drive up the prices of restaurant and tourism services. As consumer demand intensifies, these factors will influence the CPI in the short term.

On the other hand, food prices at the beginning of 2025 have been relatively stable without extreme fluctuations. Although some items, such as fresh vegetables, have seen price increases, these are mainly due to seasonal factors and are considered normal. The government's measures to stabilize food prices, such as pork reserves and supply guarantees, have also played a positive role in price stability. Overall, while there is a seasonal uptick in the CPI due to holiday demand, the increase is moderate, and the CPI growth rate for January has remained within a reasonable range.

In addition, changes in non-food prices should also be noted. At the start of 2025, service prices, particularly in transportation, and tourism, have been rising in line with consumer demand for holiday activities and travel. Under these circumstances, the seasonal CPI increase becomes an anticipated trend.

The PPI reflects changes in the prices at the production level, directly impacting production costs for businesses. In recent years, China's PPI has experienced some volatility, influenced by global commodity prices, domestic supply-side reforms, and industrial structural adjustments. Since the beginning of 2025, the PPI has shown stability without significant fluctuations.

From an international perspective, global commodity prices have remained relatively stable, with prices for key raw materials such as oil, coal, and steel not experiencing major swings. This has reduced the pressure on domestic manufacturing costs. Meanwhile, China's ongoing supply-side structural reforms, particularly in the high-tech industries and green energy sectors, have helped support the stability of the PPI.

On the domestic front,  since the start of 2025, the overall production costs in manufacturing have remained stable without significant volatility. Due to factors such as environmental policies, overcapacity in some sectors, and market competition, certain industries are still facing production cost pressures, but these pressures have been relatively mild and have not led to a sharp increase in the PPI. Therefore, the PPI in January went down 2.3 percent year on year.

China's CPI and PPI have both demonstrated a stable price trend since the start of the year, which provides support for the country's economic operation. In the context of slowing economic growth, price stability helps prevent the occurrence of “stagflation,”ensuring the sustainability of macroeconomic performance.

The CPI and PPI data at the beginning of 2025 not only reflected the short-term boost to consumption during the Chinese New Year holidays but also revealed long-term issues such as insufficient domestic demand and the growing pains of industrial transformation. The current "stability" in price movements is more of a low-level equilibrium rather than a substantive improvement in supply-demand structure. Moving forward, policies need to strike a precise balance between stabilizing growth and adjusting the economic structure. In particular, measures such as revitalizing the real estate market, increasing household income, and promoting industrial upgrading are essential to inject lasting momentum for moderate price recovery and high-quality economic development.

Looking ahead to the full year of 2025, several factors will influence price trends. On one hand, external uncertainties, including global economic conditions and international commodity prices, may lead to some volatility in the domestic PPI. On the other hand, domestic supply-side structural reforms, changes in consumer demand, and the government's pricing policies will be important factors shaping the CPI and PPI.