China’s inflation remained low at 0.3% YoY in October 2024

• China’s inflation remained low at 0.3% YoY in October 2024, down from 0.4%YoY in September 2024, primarily due to rising food prices. Excluding the effects of food, China's inflation contracted by -0.3%YoY, reflecting that domestic demand remains weak despite the major monetary easing package introduced by the People's Bank of China in late September 2014.
• For the remainder of 2024, China’s inflation is expected to stay close to 0%.

1. Domestic demand is likely to remain weak due to low consumer confidence, while the latest fiscal measures, issued on November 8, 2024, focus on addressing local government debt problems. Under the new arrangement, the debt ceiling for local government over the next 3 years will increase from RMB29.52 trillion to RMB35.52 trillion, an increase of RMB6 trillion. This move is expected to have a limited direct impact on the overall Chinese economy.
2. On the supply side, overcapacity remains an issue, leading to a continued downward trend in product prices. The producer price index in October 2024 contracted for the 25th consecutive month at -2.9% YoY, from -2.8% YoY in September 2024.

• KResearch holds the view that the deflation risk will remain a key factor pressuring the Chinese economy for the rest of the year. For the full-year 2024, China’s economic growth is projected at 4.8%.

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