China’s Inflation Hits 34-Month High Amid Persistent Factory Deflation 📈

• Overall Consumer Prices: China's Consumer Price Index (CPI) rose 0.8% YoY in December 2025, the highest in nearly three years. However, full-year 2025 inflation remained flat (0.0%), significantly missing the government's 2% target. • Key Price Drivers: • Food: Prices surged for fresh vegetables (+18.2%) and beef (+6.9%), though pork fell 14.6%. • Luxury Goods: Gold jewellery prices spiked 68.5% YoY. • Core Inflation: Remained stable at 1.2%, indicating underlying demand remains modest. • Manufacturing & Trade: The Producer Price Index (PPI) fell 1.9% in December, marking over three years of continuous factory-gate deflation. For the full year, PPI dropped 2.6%, reflecting overcapacity and weak industrial demand. • Economic Outlook & Stimulus: While China likely met its 2025 growth targets, policymakers have allocated 62.5 Bn Yuan (US$ 8.95 Bn) for 2026 consumer trade-in schemes. This is critical for Sri Lankan exporters and apparel manufacturers monitoring global demand and raw material costs influenced by Chinese industrial health. • Policy Shift: Authorities have pledged more "proactive" macro policies for 2026, including potential interest rate cuts to counter deflationary pressures and boost household income.