East Asia Econ

China – inflation update

Upstream prices in level terms have stabilised, but as with food prices, are still falling YoY. With aggregate spending and PMI output prices remaining weak, core inflation is unlikely to be rising. The one upside risk is an end to the multi-year trend of households shifting money to time deposits.

Paul Cavey

Oct 10, 2025 • 3 min read

Public Post

East Asia Today

A couple of notes on China today, one covering today's inflation release, and the other a slide pack making the case for higher rates. Elsewhere, Taiwan released FDI data for September. Outflows have eased in recent months, but the clear shift away from investing in China is persisting.

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China – the case for higher rates

For the first time since 2021, my models show a fall in the probability of easing. The backdrop is effective monetary policy: inflation is low, but there aren't signs of rising real rates. For now, my base case is rates stop falling. For rates to rise, inflation needs to show up outside of equities.

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China – PPI stabilises, but not firmly

The stabilisation of PPI is fragile, with continued sharp falls in some of the sectors targeted by anti-involution, as well as continued weakness in building materials prices. In CPI, falling food prices will eventually reverse, but soft services prices shows underlying CPI inflation remains weak.