More policy steps to stabilize growth

Consumers are seen at a retail complex operated by Pangdonglai in Xuchang, Henan province, on April 28. (NIU SHUPEI/FOR CHINA DAILY)

China's tepid April consumer price levels have left ample room for stronger fiscal stimulus and further monetary policy easing, while the marginal increase in the core consumer price index has proved that previous stimulus measures eased some pressures driving down the prices of goods and services, economists and analysts said on Sunday.

Looking ahead, the country has plenty of policy tools to cushion external shocks triggered by the United States' tariff hikes, they added.

Data released on Saturday by the National Bureau of Statistics showed that China's consumer and factory-gate prices both dropped for a third consecutive month in April, highlighting persistent challenges from demand and reinforcing expectations for stronger policy stimulus to spur consumption, expand effective investment and stabilize foreign trade.

The CPI, which is the main gauge of inflation, dropped 0.1 percent year-on-year in April, just as it did in March. But the core CPI, which excludes volatile food and energy prices and is deemed a better gauge of the supply-demand relationship, increased 0.5 percent year-on-year in April, the same as in March.

Analysts said they expect a wave of incremental measures, including additional issuance of ultra-long-term special treasury bonds or local government special bonds, expansion of the scope of the consumer goods trade-in program, and further reduction in reserve requirement ratios and interest rates, to be rolled out in the coming months.

"Domestic prices remain subdued but stable, providing ample room for stronger fiscal stimulus and further monetary policy easing to boost domestic demand and offset external volatility," said Feng Lin, executive director of the research and development department at Golden Credit Rating International.

The escalation of the tariff conflict between the US and China in April, followed by the rollout of a package of financial support measures in May, including interest rate and RRR cuts, signals that this year's extraordinary countercyclical measures are shifting into high gear to stabilize growth, Feng said.

"We expect new incremental policies, including stronger fiscal support to boost consumption, to be introduced soon. These measures will provide important support for price stability," she added.

According to the NBS, China's producer price index, which gauges factory-gate prices, dropped 2.7 percent year-on-year in April, widening from a 2.5 percent year-on-year fall in March.

The People's Bank of China, the country's central bank, highlighted its emphasis on inflation in its first-quarter monetary policy report released on Friday, vowing to promote a reasonable recovery in prices as "an important con-sideration" in policy setting.

Li Chao, chief economist at Zheshang Securities, noted that the central bank has shifted its primary policy objective toward supporting reasonable price recovery and stabilizing growth, and the tone of "moderately loose" monetary policy sends a clear and positive signal.

"The shift is mainly driven by mounting external shocks and persistent structural imbalances —namely, weak effective domestic demand and excessive competition on the supply side," he said. "A moderately accommodative monetary policy is needed to cushion the downward pressure on the economy and mitigate external uncertainties."

Li said his team expects monetary policy to maintain an accommodative stance throughout 2025, working in tandem with fiscal, industrial, employment and social security policies to create a strong and coordinated policy mix.

"We anticipate an additional 50 basis point RRR cut and another 20 basis point interest rate cut within the year," he added.

Xiong Yuan, chief economist at Guosheng Securities, said that tariffs will likely dampen external demand, while domestic sectors face structural constraints, signaling the need for stronger demand-side stimulus. "More incremental policy steps are likely on the horizon, particularly in the form of stronger fiscal support, boosting domestic demand and stabilizing foreign trade," he said.