China inflation rises at fastest pace in almost two years

China’s consumer prices rose at their fastest pace in almost two years, according to data released on Wednesday. The consumer price index (CPI) increased 0.7 percent year‑on‑year in November, up from a 0.2 percent gain in October. The surge is largely due to a reversal in food prices, with fresh vegetable costs jumping after nine consecutive months of decline.

The Chinese economy has been grappling with deflationary pressure and weak spending for several years, a situation compounded by a prolonged property‑sector crisis and lingering effects of the Covid pandemic on consumer sentiment. Authorities are trying to shift the economy toward a model driven more by domestic consumption than by exports and manufacturing. An expanded subsidy scheme introduced earlier this year produced a short‑term boost in purchases, but it failed to reverse the long‑standing slump in consumer confidence.

The producer price index (PPI), which measures the cost of goods before they reach wholesale or distribution, fell to 2.2 percent last month, reflecting weak demand and a global oversupply of Chinese manufactured goods. This has fueled expectations that overcapacity will persist, keeping China in deflation through next year and into 2027.

Despite these challenges, China’s exports have continued to boom, providing a vital economic lifeline. Recent data showed the country’s trade surplus surpassed $1 trillion for the first time, even as trade tensions with the United States and other Western governments have intensified. However, imports fell short of forecasts, rising only 1.9 percent year‑on‑year in November, underscoring the weakness in domestic consumption.

The rise in consumer prices and the ongoing trade dynamics are significant for China’s economic outlook. As the world’s second‑largest economy, China’s performance has broad implications for global trade and economic stability. Its ability to balance growth, manage inflation, and address domestic consumption challenges will be closely watched in the coming months.