In January, China recorded its fastest rate of prices falling prices in a month since 2009, sparking speculation that the government will be forced to unleash a new round of stimulus measures.
Consumer prices fell by 0.8% in January, making the fourth straight month of deflation and comfortably outstripping forecasts of a 0.5% drop.
Stock markets too have reflected a spate of problems afflicting China from property crisis, soaring youth unemployment, and stuttering export growth.
Beijing has already issued billions of dollars in sovereign bonds to boost infrastructure spending and consumption, but to little effect so far.
Apart from August last year, prices have been in constant decline since. 2021 led by food prices, which are at the lowest level since records began currently.
Citigroup said January’s fall was exacerbated by a late Chinese New Year holiday but core inflation was at a “concerningly low level” while durable goods prices were still soft.
After the seeming failure of attempts to boost the stock market, Citi sees Beijing’s attention turning towards the economy.
“We are not expecting a ‘bazooka’ stimulus for the year, the bank added, but a timely and carefully implemented package could still set the stage for reflation”.