China's Core Inflation Numbers Raise Concerns

Economists at Citi have expressed concern over China's core inflation numbers, as recent data reveals a continuous decrease in prices for the fourth consecutive month in January.

Contrary to economists' expectations of a 0.5% decline, China's consumer prices fell by 0.8% year-over-year, marking the most significant decline since September 2009.

While core inflation remained positive, it decreased to 0.4% year-over-year from 0.6%.

Meanwhile, producer prices experienced a 2.5% year-over-year decrease, which was slightly better than economists' anticipated decline of 2.7%.

Citi economists, led by Xinjy Ji, suggest that the later Chinese New Year may have contributed to this downward impact but have also highlighted concerns about the end of services reflation.

"Services reflation looks behind us now. Durable goods prices are still weak, and there are growing concerns about China's overcapacity in certain sectors. Additionally, weak income expectations, especially for middle- to high-income groups, are unlikely to be helpful," they stated in a note to clients.

While they do not expect drastic measures, they suggest that new policies such as a 5% growth target, a reduction in the loan prime rate, and special government bond issuance could prove beneficial.

Economists at ING believe that inflation has potentially hit its lowest point and predict that the drag from pork prices will fade in the upcoming months.

On Thursday, the Hang Seng index experienced a 1.3% slump, while the Shanghai Composite index rose by 1.3%, marking its third consecutive rise and an overall gain of 6.1% during this period.