The Chinese economy is in trouble.

You already know that, so I won’t dwell too long on it, but I felt compelled to mention the latest CPI data out of Beijing because it underscored the risk of outright deflation for Xi.

Consumer price growth in China has teetered on the brink for months, and figures released on Friday suggested the malaise continued in December, when headline CPI slipped 0.3%, the third consecutive decline.

Not since 2009 have consumer prices fallen on a YoY basis for three straight months.

PPI, meanwhile, was in deflation for a 15th consecutive month, as falling prices for raw materials and, more importantly, lackluster demand, impart an air of macro morbidity.

China’s trade data, also released on Friday, showed exports rose 2.3% in December, while imports managed a meager 0.2% increase.

Note that exports declined for the full year in 2023, the first annual drop since 2016. Of course, Chinese exports benefited enormously from the pandemic, which increased global demand for cheap goods, but the party’s over now.

“Since the deterioration in the first half of 2023, exports have continued to bottom out with no major recovery given the weakness in Europe and slowing growth in the US,” SocGen’s Michelle Lam said Friday. “The outlook for 2024 is also likely to be sluggish given the global backdrop.”

As for prices, Lam said simply, “deflation concerns have not gone away.”