March 9, 2025
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China’s Consumption Slump Deepens as February Prices Decline
Consumer prices in China fell last month for the first time in a year, highlighting the ongoing struggles of the world’s second-largest economy to stimulate spending. At the same time, trade challenges are intensifying as US tariffs, introduced under Donald Trump’s administration, continue to affect China’s exports.
Since the end of the pandemic, consumer spending in China has remained sluggish, raising concerns of a potential deflationary spiral. The situation has been further exacerbated by President Trump’s second term, marked by sweeping tariffs on Chinese goods. Beijing is now preparing to implement its own retaliatory measures—tariffs on US agricultural products, including corn and chicken, set to take effect on Monday.
The ongoing trade war is likely to hinder China’s hopes of achieving strong economic growth this year, particularly since exports—once a crucial growth engine—are now facing significant headwinds. Last year, China’s exports reached record highs, but that momentum appears to be fading.
According to data released by China’s National Bureau of Statistics (NBS), the consumer price index (CPI)—a key inflation measure—declined by 0.7 percent year-on-year in February. This marked a steeper drop than the 0.4 percent contraction forecasted by Bloomberg. February’s decline also reversed the 0.5 percent uptick recorded in January, a month when a surge in spending due to the Lunar New Year boosted inflation to its highest rate in months.
Dong Lijuan, a spokesperson for the NBS, attributed the decline to factors such as the timing of the Lunar New Year, holiday spending patterns, and fluctuations in global commodity prices. “This is mainly due to the impact of factors such as the (Lunar New Year) being in a different month, holidays, and price fluctuations of some international staple commodities,” she explained.
These figures were released as Chinese officials gathered in Beijing for the country’s biggest annual political event, the “Two Sessions.” During this event, Beijing announced a target of 2 percent inflation for the year, with hopes of encouraging consumer spending once again.
Zhiwei Zhang, President and Chief Economist at Pinpoint Asset Management, noted, “China’s economy still faces deflationary pressure.” Zhang also emphasized that, with exports facing downside risks due to the ongoing trade war, the fiscal policy must become more proactive, as domestic demand remains weak.
In 2024, China’s export sector saw a significant surge, providing much-needed economic relief amid the ongoing struggles in consumption and the property sector. However, early signs of the impact of the renewed trade war with the United States are already visible. Official data for the first two months of 2025 revealed that exports grew by just 2.3 percent year-on-year—well below expectations and a sharp decline from the 10.7 percent growth seen in December.
At a Wednesday meeting during the “Two Sessions,” Premier Li Qiang set a national growth target of “around 5 percent” for this year, the same goal as in 2024. Many economists consider this target ambitious, given the accelerating challenges faced by China’s economy.
China’s Consumption Slump Deepens
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