Consumer prices in China fall at fastest pace since 2009

(Patria) - Consumer prices in China fell in January at the fastest pace in 15 years.

This highlights the challenges for policymakers trying to revive investor confidence in the world's second-largest economy.

China's consumer price index fell 0.8 percent year-on-year in January, according to official statistics released on Thursday. This marks the fourth consecutive month of price declines and the steepest drop since 2009, reports the Financial Times.

The price decline was sharper than the 0.5 percent forecast by analysts and the 0.3 percent drop in December.

Deflation comes as the Chinese economy grapples with a prolonged downturn in the real estate sector, a stock market crash, and weakening export revenues.

The producer price index improved slightly, falling 2.5 percent year-on-year in January, a modest improvement from the 2.7 percent decline in December and the analyst forecast of 2.6 percent.

The Chinese economy entered deflation in July, with prices unchanged or falling every month except August. This has led economists to warn that prolonged deflation could undermine business and consumer confidence.

Deflationary pressures are weighing on corporate earnings and fueling the stock market downturn, analysts assess.

They believe that persistent Chinese deflation and the difficult state of stock markets indicate that household demand and private sector confidence remain weak, posing significant risks to economic growth prospects.