Anti-Involution Policies Deliver Results as August Price Indicators Improve

On September 10, the National Bureau of Statistics reported that China’s August CPI and PPI data signaled a turning point in price trends. The Producer Price Index (PPI) halted an eight-month run of month-on-month declines and saw its year-on-year drop narrow for the first time since March, while the core Consumer Price Index (CPI) registered its fourth consecutive month of accelerating annual growth.

In detail, August’s CPI held steady from July and fell 0.4% year-on-year. Excluding food and energy, the core CPI rose 0.9% annually. The PPI shifted from a 0.2% month-on-month decline in July to no change in August, while recording a 2.9% year-on-year decrease.

Analysts view the PPI’s month-on-month stabilization as a sensitive indicator of marginal price shifts. Improved supply-demand dynamics drove prices higher in some energy and raw-material sectors, even as imported factors—chiefly softer international oil prices—pushed domestic petroleum extraction and refined-product prices down by 1.4% and 0.6%, respectively. Non-ferrous metal smelting and rolling prices advanced 0.2%, led by gold and aluminum, while copper smelting fell 1.1%.

Year-on-year, the PPI’s 2.9% decline narrowed by 0.7 percentage points from July. Beyond a low base effect, intensified macroeconomic support measures helped curb price falls in competitive industries, bolster prices in emerging sectors, and lift costs for upgraded consumer goods. Notably, coal processing; ferrous-metal smelting and rolling; coal mining and washing; photovoltaic equipment manufacturing; and new-energy vehicle assembly all saw their annual price declines narrow by 10.3, 6.0, 3.2, 2.8 and 0.6 percentage points, respectively.

Guangfa Securities’ chief economist, Guo Lei, pointed out that August’s PMI indicators for raw-material purchase and factory-gate prices rose for a third straight month, offering early evidence that anti-involution policies are gaining traction. The PPI data lend support to this view.

In contrast to the PPI’s marginal turnaround, the core CPI’s persistent acceleration underscores ongoing improvement in the internal structure of consumer prices. At 0.9% year-on-year, core CPI reached a new high for 2025. Industrial consumer-goods prices excluding energy climbed 1.5% annually, up 0.3 percentage points from July. As a measure that strips out volatile food and energy costs, core CPI is widely regarded as a barometer of stable, underlying consumption demand—a reflection, according to senior statistician Dong Lijuan, of the sustained impact of policies aimed at expanding domestic demand.

Looking ahead, many market observers anticipate that continued competition-enhancing directives, the gradual roll-out of domestic-demand stimuli and a favorable low base in the fourth quarter will support a moderate rebound in both CPI and PPI. Nevertheless, the divergence between headline CPI—which moved from flat to negative year-on-year in August—and the rising core CPI highlights the need to solidify the recovery. Everbright Securities analyst Liu Xingchen cautions that current PPI gains are concentrated in upstream raw materials and industrial goods, with limited downstream pass-through in a still-weak consumer environment. He argues that further CPI gains will depend on a genuine pickup in household spending.