Concerns are intensifying regarding the pressures on China's vast economy due to insufficient demand. The nation's producer price index (PPI) experienced a year-on-year decline of 2.9% in October, as reported by the National Bureau of Statistics (NBS) on Saturday. The PPI effectively measures the cost of goods 'at the factory gate,' in contrast to consumer price indices which gauge prices in retail environments.
After peaking in June 2022, China's PPI has gradually decreased, marked by a consistent decrease in demand for industrial products throughout the country. Notably, the PPI has dropped for 25 consecutive months when evaluated year-on-year. The sub-index for building materials and non-metals highlighted a drastic decrease of 6.7% in October, primarily due to the struggling real estate sector's low demand. Additional sectors, including oil and gas extraction, oil and coal processing, chemical products, and automobile manufacturing, also witnessed falling producer prices in October, as indicated by the NBS. This decline in producer prices mirrors an economy not expanding at a pace satisfactory to Beijing.
Recent statistics show that China's gross domestic product (GDP) grew by 4.6% year-on-year in the third quarter, slightly trailing Beijing's annual growth target of 5% for 2024. In response to these economic challenges, Beijing has implemented various fiscal stimulus measures. Furthermore, the People's Bank of China has responded by reducing interest rates and lowering reserve requirements for banks in an effort to invigorate economic activity. Over the weekend, a substantial $1.2 trillion debt-swap plan was unveiled by Beijing to aid in deleveraging local and state governments, increasing their capacity to enhance spending..