China: It’s not going well.

Still. It’s still not going well for the world’s second-largest economy. “Still” is a reference to Beijing’s nascent stimulus push which, despite a lot of rhetoric, hasn’t actually produced much in the way of concrete policy on the fiscal side, let alone real-world results.

Authorities in Beijing would doubtlessly quibble with that contention. In fact, if I lived on the Mainland (or, for that matter, in post-2020 Hong Kong, where democracy’s a quaint notion), I’d probably be arrested for suggesting the Party hasn’t done enough to revive domestic animal spirits. But they haven’t, and even Xi Jinping’s beholden statisticians can’t paper over the country’s deflationary malaise, or at least not without raising eyebrows among inquisitive outsiders running their own numbers.

On Thursday, the NBS said consumer prices rose a mere 0.1% last month on an annual basis, not materially different from an unchanged print and the slowest 12-month rate since March. Tellingly, that was in-line with estimates, which is to say disinflation’s expected. Mercifully for the Party narrative (which insists China’s not headed into deflation), core prices rose 0.4%, the briskest pace since July.

Producer prices spent a 27th month in deflation, which is to say two, working on three, years. As the figure shows, this really is endemic, Party protestations aside.

The overarching takeaway’s clear enough: Stimulus promises are insufficient. Chinese consumers need actual stimulus. Actions speak louder than words, and although the PBoC’s done its part since September’s coordinated communications blitz, the Party’s long on nebulous rhetoric and short on specifics when it comes to demand-side measures.

I don’t know how many times I’ve said this over the past — checks notes — three years, but here it is again: In a balance sheet recession, or any variant thereof, the economy needs the government to be a spender of last resort. A lender of last resort’s irrelevant if no one wants to borrow.

Do note, headline inflation ran just 0.2% for the full year in 2024. That was the slowest since 2009 and so far off the pace economists estimated at the beginning of last year that consensus isn’t even worth mentioning. In the same vein, the implicit deflator was almost surely negative in 2024, and it’ll probably be negative this year too. There’s no modern precedent for that.

The figure above’s a stark reminder: The deflator headed into Q4 in deflation for six consecutive quarters, and seven in eight. Q4 will make seven in a row and eight in nine.

Suffice to say Thursday’s inflation update was yet another piece of evidence which “illustrate[s] the fragility of the recovery since the policy shift in late-September,” as SocGen’s Wei Yao and Michelle Lam put it.

When the Party started making a lot of noise about fiscal stimulus four months ago, 10-year Chinese government bond yields were 2.05%. They were as low as 1.59% on January 5. If you’re wondering how it’s going, that’s how it’s going.