China news: Chinese inflation data sparks more deflationary concerns after Yellen's warning

March inflation data for the People’s Republic of China has been released – with figures looking dire.

Analysts had broadly expected a 0.4% increase in the consumer price index (CPI) for March, year on year – significantly lower than February’s 0.7%, boosted by Lunar New Year festivities.

However, that’s not what they got. Instead, figures for March showed CPI increased by just 0.1%, sparking anew growing concerns that the country is dangerously close to a deflation spiral.

In the same data, China’s Producer Price Index (PPI) dropped marginally more in March than in February, down 2.8% YoY compared with February’s 2.7% YoY fall. 

'Bad news' for China

The data is “bad news”, commented Alicia Garcia-Herrero, chief economist for the Asia Pacific region at Natixis Wealth Management:

Yellen's China warning

Garcia-Herrero’s words echo those of US Treasury secretary Janet Yellen last week.

Yellen has been on a four-day visit this week to China this week and last week, speaking with country officials, as well as those from the People’s Bank of China, among others.

A salient point of the trip, as well as a matter of contention, has been Yellen’s warning China to cease “oversupply” of key exported goods, including technology like electric vehicles.

Yellen warned on April 5th that this “overcapacity” would threaten jobs in both America and beyond:

Whether or not China intends to heed her warning remains to be seen.