China struggles to shake off disinflationary pressures as trade threats loom

Subscribe to enjoy similar stories. China’s consumer prices nosedived in February, in a sign of stubborn disinflationary pressures, ending a year’s run of tepid price growth and underscoring the challenges policymakers face in stimulating domestic demand as trade tensions intensify.

The consumer-price index declined 0.7% from a year earlier in February, flipping from the 0.5% increase seen in the prior month, the National Bureau of Statistics said Sunday. A Wall Street Journal poll of economists had tipped a 0.5% drop.

Economists say the price decline was in part due to high-base effects from the same period a year earlier when the weeklong Lunar New Year holiday fell entirely in February versus in late January this year. Still, economists caution that Sunday’s downbeat reading suggests that even after the recent stimulus pivot, policymakers have much to do to convince cautious Chinese households to open their wallets, a daunting task that they say is essential to keeping the tariff-hit economy humming this year.

In a Wednesday work report addressed to China’s annual legislature session, Chinese Premier Li Qiang announced an ambitious growth goal of around 5% for the world’s second-largest economy this year, pledging to ramp up government borrowing and boost domestic consumption as Beijing gears up for more trade salvos from the U.S. In a bid to project confidence, China’s finance minister said Thursday that the government has ample policy tools and flexibility to counteract internal and external uncertainties, hinting at extra stimulus measures to come if economic growth deviates later this year.

Already, exports, a key growth driver for the $18 trillion economy, have shown signs of wobbling. China’s outbound shipments