Inflation in China: prices are rising at the fastest rate in 3 years, but slower than the authorities want
China's consumer inflation rose to its highest level in nearly three years in December as food prices rose. Looking at the entire last year, the consumer price index in the Middle Kingdom remained unchanged compared to 2024. Producers were still facing deflation.
China's consumer price index (CPI) rose 0.8% year-on-year in December, the National Bureau of Statistics (NBS) reported on Friday. Thus, inflation in the world's second largest economy reached its highest level since February 2023. The reading was in line with the forecasts of surveyed economists and followed the November CPI increase of 0.7%.
Throughout 2025, Chinese consumer inflation remained unchanged compared to 2024, failing to meet Beijing's ambitions.. One of the main development goals set by the communist authorities for last year was to raise the CPI to 2%, as recalled by the state news agency Xinhua in a discussion of the reading.
According to government plans, the increase in inflation was to balance domestic supply and demand, while maintaining prices within the assumed range. Beijing wants to stimulate domestic consumption and for this purpose it used various tools last year, including: subsidies for household appliances and electronics, encouraging citizens to replace appliances with new ones.
Recently, the program was extended until 2026 and now the Chinese can receive state funding for the purchase of smartphones, tablets, smartwatches, fitness bands or smart glasses. Beijing will allocate 62.5 billion yuan for subsidies, i.e. over PLN 32 billion in Polish currency.
More expensive food, gold madness and producer inflation
According to NBS data presented on Friday, food prices increased by 1.1% in December and, according to Chinese statisticians, they had a decisive impact on the final inflation reading. The cold winter led to a shortage of fresh vegetables. Their prices increased by 18.2% in December. Pork prices also increased significantly, with prices increasing by 14.6%.
Core inflation, which excludes volatile food and energy prices, rose 1.2% year-on-year in December, unchanged from the previous month's reading. Gold jewelry remained an interesting category of goods included in the statistics. Prices in China rose 68.5% year-on-year in December, illustrating the speculative frenzy for the precious metal that has gripped the country and extends far beyond bars and coins.
Producer prices (so-called PPI inflation) fell by 1.9% in December compared to the previous year. The reading was better than the 2% withdrawal forecast and represented a marked slowdown from -2.2% in November, but producer deflation has persisted in China for more than three years. In other words, goods become cheaper when they leave the plant gate.
Depending on the media, interpretations of the presented data vary. According to Chinese state media agencies, the December inflation readings are evidence that the government's policies aimed at stimulating domestic demand are having a positive impact on the economy.
“CNBC” commented, however, that Beijing's stimulus measures implemented so far, including consumer subsidy programs, have actually done little to stimulate demand and the Chinese are still counting every yuan, fearing about the labor market and the ongoing crisis in the real estate sector.
China's real GDP growth is likely to slow to 4.5% in the fourth quarter, down from 4.8% in the third quarter, according to Bank of America economists. President Xi Jinping declared during the annual meeting with the China People's Political Consultative Conference (CPPCC) that the world's second economy will achieve its growth target of 5% in 2025. However, exports remain its main driving force, while the foundations are crumbling, as evidenced by the lowest level of investment since the late 1990s.
