Analysis: Deflationary Pressure Now Entrenched in China’s Economy

With the release of China’s first-quarter economic data, the market was more focused on GDP growth, paying less attention to deflation. In the first quarter, real GDP grew by 5.3% year-on-year, surpassing the annual target of around 5%. However, nominal GDP only grew 4.2%, indicating that the GDP deflator fell 1.1% year-on-year.

The GDP deflator is a broader measure of changes in price levels compared to the consumer price index and the producer price index (PPI), reflecting the overall situation across various economic sectors. China’s GDP deflator for the first quarter stood at -1.1%, the lowest since 2009 when the GDP deflator for the second and third quarters was -1.5%.