China’s economy is currently facing a deep-seated structural crisis. With the long-standing sluggish real estate market, high youth unemployment rates, and severe lack of domestic demand, consumer confidence has plummeted. Official data shows that in May, the national consumer price index (CPI) saw a lower-than-expected year-on-year increase, with a significant decline in food prices; and a month-on-month reversal from a 0.3% increase in April to a 0.1% decrease.
On June 10, data released by the National Bureau of Statistics of the Communist Party of China revealed that in May 2026, the national consumer price index rose by 1.2% year-on-year, consistent with the previous month but lower than the market’s expectation of 1.3%. In urban areas, prices increased by 1.3%, while in rural areas, prices rose by 1.1%. Food prices fell by 1.7% (including a 16.1% decrease in pork prices), while non-food prices increased by 1.9%. Consumer goods prices rose by 1.6%, and service prices rose by 0.8%. From January to May, the national consumer price index rose by 1.0% compared to the same period last year.
Looking at the monthly comparison, the national consumer price index saw a 0.1% decrease from the previous month. Urban prices fell by 0.1%, rural prices declined by 0.1%, food prices dropped by 0.4%, and non-food prices decreased by 0.1%. This indicates a continued situation of insufficient consumption and a stronger supply than demand.
According to reports from mainland Chinese media, Wang Qing, Chief Macro Analyst at Orient Securities, stated that excluding the volatile changes in energy and food prices, the core CPI, which better reflects the base price level, increased by 1.1% year-on-year in May. This increase narrowed by 0.1 percentage points from the previous month, remaining at a relatively low level. The main reason behind this is the clear characteristics of stronger supply than demand in the current consumption market, leaving significant room for policies to boost consumption in the future.
Wen Bin, Chief Economist at China Minsheng Bank, pointed out that the low base effect, high oil prices, and seasonal rebound in service consumption will support a moderate increase in CPI. However, food prices, particularly the ongoing low pork prices, will continue to weigh down the index. It is anticipated that CPI will fluctuate below 1.5%.
Wen Bin emphasized that macroeconomic policies still need to focus on boosting end-demand. Monetary policy is temporarily constrained by price control, with limited room for easing, while fiscal policy could play a greater role. For instance, accelerating the implementation of measures to stabilize employment, expand domestic demand, and increase income, boosting consumption through long-term special government bonds and policies such as trading in old goods for new ones, thereby clearing the bottlenecks in price transmission from production to consumption.