China's Inflation Hits 34-Month High in December, But 2025 Sees Weakest Growth in 16 Years

• China's consumer inflation reached a 34-month high in December, climbing 0.8% year-on-year, driven by rising food prices.
• Despite the December surge, full-year inflation for 2025 was flat, marking the weakest growth in 16 years and missing Beijing's 2% target.
• The December increase was largely due to fresh vegetable prices surging 18.2% and beef prices rising 6.9%, influenced by pre-Lunar New Year demand.
• Economists warn that underlying demand remains soft, with a prolonged property sector downturn, sluggish job market, and overcapacity weighing on household confidence.
• Factory-gate deflation continued for over three years, with the producer price index falling 1.9% in December, strengthening expectations for further policy stimulus in 2026.

Why It Matters: China faces a complex economic picture with rising consumer prices but persistent weak demand, prompting stimulus expectations.