Consumer prices in China plummeted last month at the fastest pace since the global financial crisis.
The Chinese government is facing growing pressure to support a crumbling economy as experts warn that the consumer price index dropped 0.8 per cent in January from a year ago.
On Thursday, the National Bureau of Statistics said the economy is the weakest since September 2009.
It comes as calls mount for China to support an economic rebound.
Zhiwei Zhang, president and chief economist at Pinpoint Asset Management Ltd said: “The CPI data today shows China faces persistent deflationary pressure.
“China needs to take actions quickly and aggressively to avoid the risk of deflationary expectation to be entrenched among consumers.”
The decline was worse than economists’ expectations for a 0.5 per cent drop.
Despite China enforcing measures such as releasing long-term cash for banks and issuing more government bonds to fund construction projects, confidence in the world’s second-largest economy has flagged.
Last year the nation struggled with falling prices as China attempted to revive domestic demand and consumer confidence.
Core CPI, which removes volatile food and energy costs, rose 0.4 per cent, slower than December and the weakest rise since June last year.
Experts warn that the risk of deflation is a major concern.
If China is unable to turn the trend around, it risks a downward spiral with people holding off on purchases due to expectations prices would continue falling.
Economists suggest deflation could continue for at least another six months.
Raymond Yeung, chief economist for Greater China at Australia & New Zealand Banking Group Ltd said: “The prolonged property woes and stock market volatility hurt household sentiment.
“Deflationary pressure remains strong,” driven by a lack of demand leading to overcapacity, he said.
Written by: Georgina Cutler @MSN
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