It has been warned that China could face its longest deflationary cycle since the 1960s, as policymakers pin their hopes on implementing measures to breathe life into the world’s second-largest economy.

Newsweek has reached out to China’s National Bureau of Statistics with an emailed request for comment.

China has struggled to stabilize its economy since the end of strict lockdowns imposed by President Xi Jinping during the “Zero Covid” pandemic, buffeted by headwinds such as a depressed real estate market, a sector that accounts for up to 70% of the family wealth. At the same time, low wages and economic uncertainty have made consumers cautious, further weighing on prices.

While China’s statistics bureau announced Friday that the country had met its gross domestic product (GDP) expansion target thanks to a better-than-expected fourth-quarter performance, analysts note that deflation, which has continued in 2024 for the second year in a row – continues to increase. constitute a long-term risk to recovery.

The average forecast in a Bloomberg survey of 15 analysts estimated that the GDP deflator, a broad measure of price changes in an economy, would reach 0. 2% this year.

The GDP deflator, which measures the change in price levels by comparing nominal (inflation-adjusted) GDP to real (constant price) GDP, will reach -0.2 percent this year, compared to the average 3.4 percent annual rise in prices during the decade before the pandemic.

Statistics reported a 0. 2% increase in the consumer value index (CPI) for 2024. The slight increase indicates some progress in increasing value, but remains well below the inflation levels that Beijing seeks to revitalize internal demand and economic dynamics.

JP Morgan Chase & Co. and other Wall Street lenders cited by Bloomberg predict the deflationary cycle will continue this year, marking the longest such stretch since the Great Leap Forward era under Chinese Communist leader Mao Zedong, whose policies caused a famine that killed tens of millions.

The country met its GDP target of around five percent last year, with a better-than-expected expansion of five. 4 percent in the fourth quarter. However, many economists, including former Chinese number two Li Keqiang, have cast doubt on China’s official expansion figures, a sensitive issue for Xi Jinping and one that has put some prominent economists in a difficult situation.

Frédéric Neumann, lead Asia economist at HSBC Holdings Plc in Hong Kong, told Bloomberg: “Stimulus, stimulus, stimulus, especially on the fiscal side, are surely mandatory in China. We have seen in other economies that a strong political push is needed. Disinflation is definitely over. And we believe that this will happen in China, but in a very concrete way. »

Disinflation is a reduction in inflation.

Kang Yi, director of China’s National Bureau of Statistics, said: “There have been positive changes in the price situation. Market demand is recovering, leading to a rebound in prices. From a price perspective in consumption, the CPI (consumption price index) higher in the fourth quarter, mainly due to the downward effect of food prices, more representative of the dating between source and demand, the underlying CPI increased for three consecutive months.

The move comes just before the Lunar New Year, a time when many Chinese consumers buy gifts for family members and for stops in their hometowns or vacation spots in China and beyond.

Chinese leaders hope the $1. 4 trillion stimulus package announced in September will put the economy on firmer footing this year, and Xi has called for more proactive measures going forward.

Update 01/17/24, 7:20 a. m. m. ET: This article has been updated with more information.

Micah McCartney is a Newsweek reporter in Taipei, Taiwan. It covers U. S. -China relations, security issues in East and Southeast Asia, and China-Taiwan relations. You can contact Micah by emailing m. mccartney@newsweek. com.