Fitch Warns of Rising Deflation Risk as China’s Weak Domestic Demand Persists

Fitch Ratings’s latest report warns that China’s weak domestic demand may continue to exert downward pressure on prices.

Deflation Shadow Over China’s Growth Path

■China’s retail sales have continued to fall short of expectations in the latest quarter.

■Consumer confidence indices have shown a noticeable decline.

■E‑commerce growth rates have slowed.

■Falling price pressures are causing volatility in the Producer Price Index (PPI).

Fitch’s Cautionary Assessment

■Fitch re-evaluates China’s 5.0% growth target with a negative outlook.

■The agency predicts that deflation could persist until 2025 if domestic demand remains weak.

■Fitch underscores the need to keep interest rates around 3.5% within China’s monetary policy framework.

■Fitch projects China’s trade deficit to reach $200 billion in 2024.

Impact on Global Markets

■A decline in China’s consumer spending could adversely affect global supply chains.

■US and European exchanges experienced volatility amid concerns over China’s growth.

■Commodity prices continue to fluctuate due to reduced industrial demand in China.

■Central banks anticipate tighter oversight of China’s monetary policy.

Strategic Responses and Policy Options

■The Chinese government plans to boost consumer credit to stimulate demand.

■Monetary policy could be supported by interest rate cuts and liquidity injections.

■Trade agreements may be revisited to strengthen external demand.

■Financial regulations could be eased to increase consumer confidence.

Fitch’s warning highlights the fragility of China’s growth dynamics, creating uncertainty for global investors. Markets are watching how China’s domestic demand recovery will shape long‑term risks beyond short‑term volatility.