China makes small dents in deflation battle as supply-demand imbalance persists

China’s inflation slowed in January as consumer prices rose just 0.2% year-on-year, while producer price deflation persisted, underscoring weak domestic demand. Despite Beijing’s stimulus efforts, supply-demand imbalances continue to pressure industrial profits. Economists warn China’s deflationary pressures may linger, complicating economic recovery and 2026 growth targets.