French newspaper Le Monde published an article on September 19 highlighting China’s spreading deflation problem, which has created a vicious cycle affecting the world’s second-largest economy.
According to the latest report from the China-EU Chamber of Commerce released on September 17, China faces systemic challenges including entrenched deflation and persistent imbalances between supply and demand. Official data shows consumer prices fell 0.4 percent year-on-year in August, the steepest decline since February. Food prices plummeted 4.3 percent, with pork prices continuing their sharp drop, causing Chinese farmers to lose an average of 70 yuan (US$9.8) per pig.
The deflation extends beyond food to housing, where average new home prices have been falling since April 2022. First-tier cities including Beijing, Shenzhen, and Guangzhou saw prices drop 0.1 percent in August, while second-tier cities declined 0.3 percent and smaller cities fell 0.4 percent.
The deflation has created a damaging feedback loop. Companies are reducing production and hiring due to falling profits, pushing youth unemployment to 18.9 percent in August – a two-year high. Falling prices encourage consumers to delay purchases, further suppressing demand. Retail sales of consumer goods grew only 3.4 percent year-on-year in August, the slowest pace in nine months, despite government voucher programs for appliances and smartphones.
The deflation’s impact is visible in everyday life. At Tuanjiehu Park in central Beijing, electric boat rental prices have been cut to one-third of previous rates yet still struggle to attract customers. Young people are abandoning paid private gyms in favor of free public fitness equipment, traditionally used by elderly residents.
Wang Yuxun, a 62-year-old resident, philosophically noted the change: “Since this is the case, old people like me come to exercise at dawn. Young people haven’t given up on fitness because they understand that health is most important. For major health problems, reimbursement limits are low, and no one expects the state to increase healthcare investment. Now, the best approach is still to economize.”
Source: Radio France International, September 20, 2025
https://rfi.my/C1fB