Global Market: China inflation rises in August, but weak demand remains a concern

China's consumer and producer prices rose slightly faster in August, but inflation remained subdued, highlighting the persistent weakness in domestic demand that continues to weigh on the world's second-largest economy, according to a report by Reuters.

The consumer price index (CPI), a key measure of inflation, rose 0.8% year-on-year in August, accelerating from a 0.5% increase in July, according to data from the National Bureau of Statistics. The reading was in line with economists' expectations.

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The report stated that China's domestic spending has remained weak since the COVID-19 pandemic, with consumer prices staying below Beijing's current 2% inflation target for more than three years. The CPI has also slipped into negative territory several times during that period.

The prolonged weakness in domestic demand has complicated efforts by policymakers to sustain economic growth, even as strong exports and expanding high-tech industries provide support to the economy.

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Factory-gate prices also showed some improvement in August. The producer price index rose 3.8% from a year earlier, faster than July's 3.5% increase and above the 3.6% rise expected by economists.

The latest inflation figures came a day after data showed China's imports and exports increased sharply in August. Overseas shipments have benefited from strong global demand for technology products, particularly amid the rapid expansion of artificial intelligence-related industries.

Beijing has set an economic growth target of 4.5%-5% for this year. While that pace remains higher than growth rates in many developed economies, it would represent one of China's slowest annual expansion rates in decades.

China's economy grew 4.3% in the second quarter from a year earlier, below market expectations and marking its weakest growth in more than three years, according to Reuters.

The combination of subdued consumer inflation and continued weakness in domestic demand underscores the challenge facing Chinese policymakers as they seek to support growth while external demand and technology exports remain key sources of momentum.