20250911-招银国际-Persistent_deflation_points_to_continued_liquidity_easing_7页_854kb

China Economy Analysis Summary

Current Situation:

Persistent low inflation levels indicate the continued need for easing monetary policy. CPI inflation has returned to negative territory due to declining food prices, though core CPI has seen slight increases.

Policy Responses:

• Further liquidity easing measures, potentially including lower LPR (Loan Prime Rate) and higher RRR (Reserve Requirement Ratio).
• Fiscal policy may expand to support household and property sectors.
• Anti-involution measures are a government priority to foster recovery.

Outlook:

• The economy faces headwinds from a weakening property sector and retail demand overshot by stimulus.
• A policy easing window is expected in the fourth quarter of 2025.

Key Forecasts:

• CPI YoY: Expected at 0.2% for 2025.
• PPI YoY: Expected to rise from -2.8% (1H25) to -1.9% (2H25).
• Policy Actions: Potential 10bps LPR cut and 50bps RRR cut by end-2025.

Related Concerns:

Soft consumer demand and persistently low prices may necessitate further fiscal easing to mitigate the effects of "involution".