The data surprised analysts, who had anticipated a further contraction in prices following a 0.1% decrease in May.
Dong Lijuan, a statistician from the National Bureau of Statistics, stated that the government measures to stimulate domestic demand and encourage consumption “continued to have an effect” in June.
The world’s second-largest economy remains under deflationary pressure, due to a combination of weak domestic demand and excess industrial capacity, exacerbated by the trade war with the United States, which has impeded the clearance of inventories accumulated by companies.
Deflation, reflected in an annual decline in consumer prices, indicates weakness in domestic consumption and investment. It is particularly problematic because a drop in asset prices, often acquired through credit, creates an imbalance between loan values and bank guarantees.
Chinese authorities have reiterated that boosting domestic demand will be a central economic priority by 2025.
The same source also released the producer price index, which measures factory gate prices, showing an intensified drop from 3.3% in May to 3.6% in June, marking the lowest level since July 2023.
The decline was greater than market forecasts, which had expected a milder contraction.
Dong Lijuan warned that some export-oriented industries are “under pressure” in terms of prices and that “uncertainty in global trade has affected the expectations of exporting companies.”
In May, Beijing and Washington agreed on a temporary 90-day pact in which China would reduce tariffs on American products from 125% to 10%, while the US would lower their tariffs on Chinese goods from 145% to 30%.
