China continues to face deflation risks.

The yuan has continued to weaken, reaching its lowest level in three months, pressured by the rapid strengthening of the US dollar following the latest inflation data. The inflation rate rose to 2.6%, exceeding expectations of 2.4%. Additionally, the inauguration of Donald Trump as US President has intensified pressure on several sectors, especially exports to the US, with expectations that trade protectionism will escalate further.

Economic data from China shows that the country is still grappling with domestic deflation. Household spending has significantly decreased, and shrinking new credit suggests reduced debt repayment capacity. Investors are closely monitoring key economic indicators this week, including industrial production, retail sales, and unemployment rates, to gauge whether China will implement additional measures to revive its economy.

China’s Services PMI increased to 52.0 in October, following the government’s economic support measures introduced in late September. This has led to a rise in new businesses for the first time in four months, supported by growing export orders. Employment also saw a slight uptick. However, rising production costs, particularly in raw materials and energy, have forced companies to pass some of the burden onto consumers. Nonetheless, business confidence has improved thanks to government stimulus efforts, boosting sales growth.

China’s trade surplus surged to $95.27 billion in October, surpassing expectations of $75.1 billion, largely driven by a sharp increase in exports. Exports rose by 12.7% year-on-year to $309.06 billion as customers rushed to place larger orders to prepare for potentially higher tariffs from the US under Trump’s administration. Key exports included aluminum, other metals, and electronic circuits, with shipments to the US, Japan, and the EU growing by over 8.7%.

Meanwhile, imports to China shrank by 2.3% year-on-year, the lowest in four months, totaling $213.3 billion. This decline reflects weak domestic demand due to reduced spending capacity. Notably, imports of metals and steel fell the most.

China’s inflation rate stood at 0.3% in October, marking the slowest growth in nine months and highlighting heightened deflation risks. Despite government efforts to stimulate the slowing economy, inflation remained subdued due to a 4.8% drop in growth costs. Food inflation also showed signs of slowing.

Chinese banks issued 500 billion yuan in new loans in October, down from 738 billion yuan a year earlier, reflecting reduced demand for new investments in economic projects. These economic indicators point to a continued slowdown in growth this year, even with additional financial stimulus measures.