China’s no closer to shaking the deflation demon that’s haunted the world’s second-largest economy for more than a year.

Consumer prices managed a meager 0.2% YoY gain in June, data out of Beijing on Wednesday showed. That was just half the gain consensus expected.

If you’re feeling charitable (and I don’t know why you would be considering this is an unforced error) you might note that this makes five straight months during which the main CPI gauge at least managed to stay in positive territory.

As the figure shows, producer prices fell 0.8%. June thus marked a 21st consecutive month of factory-gate deflation for China.

It’s the same story month after painful month. Chinese consumers are apparently depressed. Domestic demand’s tepid on good days, moribund on all the others. Chinese aren’t spending. The longer this goes on, the higher the risk a deflationary mindset becomes entrenched.

This is, of course, largely a product of Xi Jinping’s domestic policy initiatives, from public health to property, from lockdowns to crackdowns. He walked Chinese consumers’ joie de vivre out into a back alley and shot it in the face like a Party functionary found guilty of taking a bribe. (“Mmm, hmmm,” he said, wiping a spatter of flag-red blood from his pursed lips and tucking a pistol back into the waistband of a Mao suit. “Look at you now.”)

Ostensibly, he thought he was doing the right thing — or the “left” thing, if you’d rather. He seemed to genuinely believe in “COVID zero” and although distinct in some important respects, the property crackdown was part of a wider social initiative aimed at promoting “common prosperity.” Whatever he thought — whatever Mao was whispering to him from beyond the grave — the end result was common annoyance.

The national irritation crescendoed in a spate of rare street protests towards the end of 2022. Being the forward-looking dictator that he is, Xi decided to pacify the protesters by lifting COVID curbs instead of — you know — shooting them all and arresting their families.

Economists and Wall Street folks predicted a grand re-opening bounce. The Chinese economy was supposed to sprint out of the gates early last year. (Never mind the overrun hospitals and morgues.) That never happened. Instead, growth meandered along at a ~5% pace, give or take, and according to bureaucrats who compile statistics with a gun to their heads. Now here we are, 18 months later, with an intractable disinflation problem.

I don’t know what the plan is at this point. There might not be one. China tried a piecemeal approach and Beijing recently unveiled a broader effort to put a floor under the property market, but so far, no dice.

China needs demand–side stimulus, which is to say fiscal stimulus. Tinkering with those policy rates — all six of them — isn’t going to make much difference, if it makes any at all. The problem isn’t the supply of credit, nor the cost of money. The problem is that nobody’s interested in borrowing or spending.

This is where economic dynamism dies. I suppose, in the end, Xi could always fix it the old fashioned way: “Go buy stuff or I’ll kill you.”