China's consumer price index (CPI) inflation reached a 21-month high in November 2025, rising to 0.7% year-on-year from 0.2% in October. This acceleration, in line with consensus forecasts, marks the highest level in nearly three years. The main driver of this increase was a sharp rise in fresh vegetable prices, which surged 7.2% month-on-month, pushing food inflation back into positive territory at 0.2% year-on-year. Despite this, year-to-date food inflation remains a drag on headline CPI, standing at -1.7%. Pork prices, currently down 15%, continue to weigh on overall food inflation, though this effect is expected to reverse in the coming year.
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Core inflation stabilised at 1.2% year-on-year in November, ending a six-month streak of acceleration. Non-food prices dipped slightly to 0.8% year-on-year, largely due to a fall in transport and communication costs, which declined to -2.3%. Other categories remained broadly stable over the month. Meanwhile, the producer price index (PPI) remained in negative territory for the 38th consecutive month at -2.2% year-on-year, though some non-ferrous metal industries recorded positive growth.
Overall, while deflationary pressures have dominated discussion this year, the recent CPI momentum suggests that 2025 could record a marginally positive inflation rate. ING expects that inflation is unlikely to constrain the People's Bank of China from pursuing policy easing in 2026, especially if core inflation remains stable and food price recovery continues. The bank projects that CPI inflation will move further into positive territory next year, which may support the economy but also imply a less stimulatory GDP deflator. Early 2026 is likely to see additional policy support, with ING pencilling in a total of 20 basis points in rate cuts.
Lynn Song, Chief Economist for Greater China at ING, notes that the surge in fresh vegetable prices has been the key factor behind the positive shift in food inflation, providing relief to those concerned that China might remain trapped in deflation.
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