Factory gate prices (PPI) slumped 1.8% vs -1.2% and -1.6%. Producer prices have been dropping since February 2012, brought down by declining commodity costs, overcapacity and falling demand.
Inflation is well below the government's target of 3.5%, giving it to room to ease if it wants to. However, BNP economist Richard Iley is concerned about the numbers, which don't yet take in the full impact of sliding oil prices.
"You got falling oil prices, falling house prices, excess capacity in the industry and an appreciating currency," Iley says. "So everything is pointing to deflation getting a whole lot worse before it can get better," he added.
Chinese exports accelerated to +15.3% on year in September from +9.4% in August and blew past forecasts for a rise of 11.8%.
Imports recovered to +7% from -2.4% and vs consensus of -2.7%.
China's trade surplus dropped to $31B from $49.83B and missed expectations of $41B.
The positive figures provide some cheer amid concerns about a slowdown in the economy, especially in the property sector, although the figures aren't wholly reassuring.
"Today's data is less good news than it appears," says RBS economist Louis Kuijs. "It suggests that China's export growth is holding up. However, the important caveat coming from the breakdown of the import data suggests that demand growth in China’s own economy remains weak."
For example, the growth in imports has been heavily driven by the processing and re-shipment of goods such as the iPhone 6.
China will allow 10 local governments - including in Shanghai and Beijing - to sell bonds as part of a pilot scheme as the government looks to clean up an estimated $3T of public debt.
Until now, municipalities weren't allowed to borrow, so the central government would do it for them, or they would use opaque vehicles that would take loans on their behalf. That has created uncertainty about the size of the debt and the soundness of municipal finances.
New home prices increased in 44 out of 70 Chinese cities on a monthly basis in March, down from 56 in April and the lowest number since October 2012.
Prices fell in eight cities, double the amount for March.
Of China's largest metropolises, Beijing's costs increased just 0.1%, the slowest pace since September 2012, while in Shanghai prices rose 0.3%.
The property sector had been been fairly torrid until early this year, when government measures to restrict house buying and rein in lending started to have a more notable impact. However, the cooling of the sector comes amid concerns about the slowdown in the broader economy.
Chinese industrial-output growth moderated to 8.7% on year in April from 8.8% in March and missed forecasts for an increase to 8.9%.
Retail sales softened to +11.9% from +12.2% and undershot consensus that was also +12.2%.
Urban fixed-asset investment +17.3% vs +17.6% and +17.7%.
Aggregate financing, the widest measure of new credit, fell to 1.55T yuan ($249B) from 2.07T yuan in March but topped expectations of 1.48T yuan. New local-currency bank loans dropped to 774.7B yuan from 1.05T yuan and fell short of forecasts of 800B yuan.
The M2 money supply rose 13.2% on year vs +12.1% in March.
The data reflects Chinese attempts to rein in soaring lending at the expense of higher growth, although expectations are increasing that the People's Bank of China will loosen monetary policy, especially with inflation low and factory gate prices in long-term deflation.
Chinese President Xi Jinping has said his country needs to get used to slower growth as the government carries out reform.
"We must boost our confidence, adapt to the new normal condition based on the characteristics of China's economic growth in the current phase and stay cool-minded," Xi said.
However, the government must also prevent risks and take "timely countermeasures to reduce potential negative effects," he said.
Xi's comments follow data that indicate slowing growth and falling inflation.
The remarks are also the latest from a senior figure - including from Xi himself - that China must tolerate more moderate growth; to lower those "potential negative effects," the government has announced mini-stimulus measures.
On month, China's CPI fell 0.3% vs -0.5% and -0.1%.
Factory-gate prices (PPI) dropped for the 26th consecutive month, declining 2% on year vs -2.3% previously and forecasts of -1.8%. The deflation demonstrates that "overcapacity remains relatively serious," the People's Bank of China said recently.
With other data indicating that China's economy is slowing down, economists attributed the fall in CPI to a weakness in demand. Today's data has increased expectations that the government will further ease monetary and fiscal policy.
"It's time for the People's Bank of China to cut the reserve requirement ratio," says ANZ economist Liu Li-Gang, adding that the risk of deflation is increasing. At the moment, major banks have to keep 20% of their deposits at the central bank, thereby restricting their lending abilities.
"The external demand side is not such a big problem for China now, because the genuine recovery is there," says Wei Yao, the China economist at Societe Generale. "This is actually offering some support to China's growth."
"This is a great business ... we're less concerned about litigation," says Chris Shumway (former Tiger Cub, now running a family office), suggesting a long position in Moody's (MCO +1.5%) at the Ira Sohn conference. Moody's business is like Bloomberg: Tougher and tougher every year for someone to catch up.
On the macro picture: "It feels a little strange out there," he says, noting hammered growth stocks, Ukraine tensions, and the Chinese slowdown. It leads to another idea, which is a short of the yuan. Devaluation, he says, is the easiest way for Beijing to "get themselves out of a tough spot." ETFs: CYB, CNY, FXCH
China's HSBC PMI edged up to 48.1 in April from 48 in March but came in below the flash figure of 48.3.
Output and new orders contracted at slower rates, staff numbers fell for the sixth month in a row, and there was a "solid reduction" in input and output prices, says Markit, adding that new export orders also shrank.
The reading indicates that factory activity contracted for the fourth consecutive month, although the figure contrasts with official data that shows slight growth.
While Beijing has recently introduced additional reform aimed at supporting growth by promoting more private-sector investment, HSBC believes that "bolder actions will be required to ensure the economy regains its momentum."
China's official manufacturing PMI edged up to 50.4 in April from 50.3 in March but slightly missed consensus of 50.5.
Output, new orders and purchases of inputs expanded, but new export orders, stocks of finished goods, backlogs of orders, imports and stocks of major inputs contracted. Input prices fell while suppliers' delivery was faster.
The data, which indicates that manufacturing is just about expanding, adds to HSBC's flash PMI reading, which shows that the sector is contracting.
"The economy is showing slight improvements due to recent policy measures but there is no sign of a bottoming out," says economist Sun Wencun.
Chinese markets are closed today for a holiday. (PR)
Asian shares mostly fall as the escalating Ukraine crisis weighs on sentiment.
In China, the mood has also been affected by the securities regulator announcing a resumption of IPOs after a three-month halt and President Xi Jinping dampening hopes for further stimulus by saying that fiscal and monetary policies would essentially remain as they are. The regulator will hold meetings on Wednesday to review the applications of four companies.
Japan -1%, Hong Kong -0.4%, China -1.6%, India -025%.
China's State Administration of Foreign Exchange is widening a trial program to loosen currency controls in the country and will allow domestic and foreign firms with at least $100M in annual foreign-exchange income to transfer money more easily.
The move is part of China's plans to reform its economy and allow a bigger role for free markets.
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