China’s Consumer Price Index (CPI) is anticipated to decrease slightly in February, as mentioned by Huang Yiping, an advisor to the People’s Bank of China (PBOC). He indicated that shifts in the external environment would add pressure on domestic demand this year.

A notable contraction in demand has been driven by a deep adjustment in the property market. Furthermore, tariff increases from the Trump administration may directly affect US-China trade, potentially leading to a considerable decline in China’s exports to the United States.

This statement serves as a caution regarding current economic conditions domestically and suggests further implications from ongoing trade tensions.

Huang’s comments suggest that inflation will remain under downward pressure, making it harder for businesses to raise prices. If household spending weakens further, companies may struggle to maintain profits, which could slow hiring and investment. This puts policymakers in a difficult position, as they must balance efforts to support the economy while avoiding long-term financial instability.

The housing sector remains a central issue. Property prices have seen steep corrections, and many developers continue to face liquidity pressures. If sentiment in the real estate market does not improve soon, it could weigh on consumer confidence and broader consumption trends. Policymakers have taken steps to ease financing conditions, but the effectiveness of these measures remains uncertain.

External risks also appear to be growing. Trade restrictions from Washington could push exporters into a tight corner, making it harder for businesses to sustain overseas revenue. If tariffs reduce shipments to the United States further, manufacturers may have to cut costs elsewhere, which could limit wage growth and domestic spending.

We are watching how authorities react to these challenges. Measures to stabilise borrowing costs and encourage lending could help in the short term, but they also come with long-term trade-offs. Over-reliance on monetary easing could add strain to the financial system, especially if credit flows to less productive areas of the economy.

With all this in mind, expectations for inflation, trade policy outcomes, and government intervention will need to be reassessed frequently. Economic shifts are moving fast, requiring close attention to both market signals and policy adjustments. The next few weeks will likely provide more clarity on the economy’s direction.