China’s consumer prices edge higher in December as 2025 inflation stays flat

December marks fastest inflation pace in over two years

China closed out 2025 with a modest but notable uptick in consumer prices, as inflation reached its fastest annual pace in more than two and a half years during December. Official data released by the National Bureau of Statistics showed that the consumer price index rose 0.8 percent year on year in the final month of the year. While the increase remains low by international standards, it represented the strongest reading since March 2023 and signaled a gradual shift in price dynamics.

Monthly gains point to stabilising demand

On a month on month basis, consumer prices edged up 0.2 percent in December. This steady increase suggests that domestic demand showed signs of stabilisation toward the end of the year. For much of 2025, China grappled with weak consumer confidence and subdued spending, reflecting pressures from the property sector slowdown and cautious household behaviour. The December figures hint that policy support and seasonal spending may have helped underpin consumption during the final quarter.

A year of flat inflation overall

Despite the December acceleration, China’s overall inflation picture for 2025 remained unchanged. Annual CPI growth for the year as a whole was effectively flat, underscoring how muted price pressures have been across the economy. For policymakers, this presents a mixed picture. On one hand, low inflation offers room for supportive monetary and fiscal measures. On the other, persistently weak price growth highlights challenges in generating sustained domestic demand.

Food and services play a key role

While detailed breakdowns were not immediately highlighted, food prices and services typically play a central role in month end movements. Seasonal factors often push food prices higher toward the end of the year, while travel and leisure spending can lift services inflation. Analysts note that any sustained recovery in consumer prices will likely depend on services consumption rather than goods, as manufacturing capacity remains ample and competition keeps goods prices under pressure.

Policy implications for 2026

The December data arrives at a crucial moment for economic planning heading into 2026. With inflation still well below levels seen in many other major economies, Chinese authorities retain flexibility in policy settings. However, officials are also wary of deflationary risks, which can discourage spending and investment if households expect prices to remain stagnant or fall. A gradual rise in CPI, even at low levels, is therefore seen as healthier than prolonged flat or negative inflation.

Comparison with global trends

China’s inflation trajectory continues to diverge from that of several Western economies, where central banks have spent recent years fighting elevated price pressures. While those economies are now seeing inflation ease, China’s challenge has been the opposite, stimulating demand without triggering asset bubbles or excessive leverage. The December CPI increase highlights that China’s price environment remains relatively benign, but also that reflation efforts are progressing slowly.

Market and business reactions

For businesses operating in China, stable prices provide predictability but also signal intense competition. Companies have limited ability to pass on costs to consumers, placing pressure on margins. At the same time, even modest inflation can improve revenue outlooks if volumes rise alongside prices. Financial markets generally view gradual CPI increases as supportive for earnings, particularly in consumer facing sectors.

Looking ahead to the new year

Economists expect consumer prices to remain on a gentle upward path in early 2026, supported by targeted stimulus measures and incremental improvements in household sentiment. Much will depend on employment conditions, income growth, and the performance of the services sector. While December’s reading does not mark a dramatic shift, it does suggest that the worst of price stagnation may be easing.

As China enters the new year, the challenge for policymakers will be to nurture this tentative momentum without undermining financial stability. The December CPI figures offer cautious encouragement, but the broader inflation story remains one of patience rather than acceleration.