🇨🇳 China’s Inflation Drops Below 0% for the First Time in 13 Months – Deflation Weighs Heavily on the Economy

China’s CPI in February fell 0.7% YoY, marking the first time inflation turned negative since January 2024. PPI also continued its sharp decline, dropping 2.2%, extending the deflationary trend that has persisted since September 2022.

These figures sound alarm bells for the world's TOP 2 economy, despite multiple economic stimulus packages rolled out in the past year. Even more concerning, exports—a key growth driver—are now facing new pressure from Trump’s proposed 20% tariff policy.

In response, Beijing may consider further economic stimulus, negotiating with the U.S. to ease trade tensions, or seeking alternative stabilization measures to keep the economy on track.

China is facing a classic deflation trap, where falling prices discourage spending, weaken corporate profits, and slow economic growth. Despite Beijing's past efforts, the economy is still struggling. With the U.S. potentially escalating trade restrictions, China may soon be forced into aggressive monetary easing or major policy shifts to prevent a prolonged downturn.

The big question is: Will China double down on stimulus, or will it pivot towards diplomatic solutions? Either way, expect big moves from Beijing soon.