China – will deflation end?

My latest video discussing the inflation outlook. Apart from the anti-involution drive, the stabilisation of demand deposits and property do ease the downwards pressure on prices. But the weakness of aggregate demand remains, and as yesterday's PMI suggested, the outlook for prices remains subdued.

Paul Cavey

Sep 1, 2025 • 1 min read

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Chapters

0:00 Introduction: Why Discuss Inflation in China?

2:02 The importance of inflation for economies

5:45 China's Inflation Trends: PPI and CPI Analysis

9:00 Downstream PPI: involution and over-supply

12:00 Upstream PPI: property and weak demand

17:00 Consumer prices: Property, Food, and Core Inflation

22:00 Outlook: Leading Indicators and Potential Turnaround

26:14 Conclusion and Resources

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East Asia Today

Today, top-down and bottom-up data in Korea show wage growth still slowing; the August S&P services PMI in China rose, but also reported continued pricing pressure; and the services PMI in Japan remained firm, which continues the narrative of a cycle led more by domestic than external developments.

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Korea – wage growth still slowing, floor should be close

The breakdown of income in the detailed Q2 GDP data shows the labour share falling, but remaining well above the pre-covid level. That implies wage growth has slowed to a bit over 2%. Bottom-up wage data for June look similar. A floor is probably close, but there's no sign of a re-acceleration yet.

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East Asia Today

The only major data release today was August inflation in Korea. The headlines moved a lot, but the underlying picture was stable. In Japan, BOJ deputy governor Himino gave an interesting speech. In China, a reminder of the drivers of deflation and how they might be changing.