The sluggish spending – combined with persistent woes in the property sector and local government financing strains – has cast doubt on the feasibility of official growth targets.
China emerged from a four-month period of deflation in February, a month after suffering the sharpest fall in prices for 14 years.
While deflation suggests the cost of goods is falling, it poses a threat to the broader economy as consumers tend to postpone purchases under such conditions, hoping for further reductions.
A lack of demand can then force companies to cut production, freeze hiring or lay off workers, while potentially also having to discount existing stocks – dampening profitability even as costs remain the same.
“Recent economic data stabilised but the momentum is not strong enough to generate upward pressure on consumer prices yet,” Zhiwei Zhang, chief economist at Pinpoint Asset Management, said in a note.
“The deflationary pressure is persistent,” he said.
Chinese President Xi Jinping said last week the country’s economy is expected to have grown about 5% last year, in line with Beijing’s official target.
Other projections suggest China’s economy came slightly short of that goal, with the International Monetary Fund predicting growth of 4.8% last year.
The IMF has forecast overall economic growth in China to slow to 4.5% this year.
© Agence France-Presse
