SCIO briefing on China's economic performance in August 2025

21st Century Business Herald:

August's PPI ended eight consecutive months of downward month-on-month decline, with the year-on-year drop narrowing. What are the main reasons behind the positive changes in the PPI? How do you expect the PPI to trend going forward? Thank you.

Fu Linghui:

Thank you for your questions. Driven by factors such as the effective implementation of macroeconomic policies, the in-depth advancement of the construction of a unified national market, the gradual optimization of corporate competition order, and the rapid growth of new momentum, the PPI in August turned from a decline to flat month on month, and the year-on-year decline narrowed. In August, the PPI fell 2.9% year on year, with the decline narrowing by 0.7 percentage points from the previous month. Month on month, it remained flat, compared to a 0.2% decline in the previous month.

The year-on-year decline in August's PPI narrowed significantly, primarily due to improved market competition practices. Relevant authorities have recently been actively promoting industry self-regulation, advocating against disorderly corporate competition, and advancing capacity management in key sectors, with effects gradually becoming apparent. In August, the ex-factory prices for coal processing, smelting and pressing of ferrous metals, and coal mining and washing saw their month-on-month declines narrow by 3.2 to 10.3 percentage points. Year-on-year price declines for photovoltaic equipment and components manufacturing and new energy vehicle manufacturing narrowed by 2.8 and 0.6 percentage points, respectively. The combined downward pressure from these five industries on the year-on-year PPI was approximately 0.5 percentage point less than the previous month.

Second, demand from emerging industries has strengthened as a driving force. As China's economic structural adjustment advances steadily, with industries moving toward high-end and intelligent development, market demand has expanded steadily, driving up prices in related sectors. Integrated circuit packaging and testing manufacturing prices rose 1.1% year on year in August, while ship and related equipment manufacturing prices gained 0.9%. The rapid development of artificial intelligence applications has driven strong market demand for smart products, boosting prices. Wearable smart device manufacturing prices rose 1.6% year on year in August.

Third, consumption-boosting policies are beginning to show results. Since the beginning of this year, special initiatives to boost consumption have been implemented in depth, with trade-in programs for consumer goods intensified and expanded in scope. These initiatives have unleashed consumption potential and driven demand for upgraded goods, leading to year-on-year ex-factory price growth in some sectors. Manufacturing prices of arts and crafts and ceremonial supplies rose 13% year on year in August. Sports ball manufacturing prices gained 4.7%. Special sports equipment and accessories manufacturing prices climbed 0.4%. Meanwhile, nutritional food manufacturing prices advanced 0.9%, while health food manufacturing prices increased 0.3%.

However, it should also be noted that the current PPI remains in negative territory, which is not conducive to improving industrial enterprise operations. Going forward, we must further expand domestic demand, advance the development of a unified national market, regulate corporate competition practices, and promote a reasonable recovery in industrial goods prices. Thank you.