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Even core inflation, which excludes volatile items such as food and energy, declined by 0.1 percent—the first drop since 2021 and only the second time in over 15 years. These figures point to persistent deflationary pressure in the country (Bloomberg News, 2025).
A key reason for China’s economic difficulties is its rapidly changing demographics. The country’s population is shrinking and aging quickly, leading to a declining workforce and increased pressure on fiscal policy. According to Darren Tay at BMI Country Risk & Industry Analysis, China’s working-age population will decrease so rapidly over the next decade that it will negatively impact the country’s GDP growth by approximately one percent per year for the next ten years (CNBC Africa, 2024). This demographic shift also creates immediate and severe financial challenges for the government (CNBC Africa, 2024).