Data released by the National Bureau of Statistics shows that China's Consumer Price Index (CPI) rose by 0.2% month-on-month and 0.2% year-on-year in January 2026. The core CPI, which excludes food and energy prices, increased by 0.8% year-on-year. The Producer Price Index (PPI) rose by 0.4% month-on-month but fell by 1.4% year-on-year, with the year-on-year decline narrowing, reflecting a moderate rebound in prices and marginal improvement in demand.
Looking at the CPI performance, the year-on-year increase moderated mainly due to the timing of the Lunar New Year holiday, but core CPI maintained a mild upward trend. January of the previous year was a Lunar New Year month, during which food and some service prices rose significantly, leading to a higher base effect and a subsequent moderation in the year-on-year increase this month. With the Lunar New Year falling in February this year, CPI is expected to show some recovery in February.
Another contributing factor was the expanded decline in energy prices. Influenced by changes in international oil prices, energy prices fell by 5% in January, dragging down the year-on-year CPI increase by approximately 0.34 percentage points. Against the backdrop of steadily recovering consumer demand, the trend of mild core CPI growth remains unchanged.
Core CPI rose by 0.3% month-on-month in January, the highest increase in nearly six months. Ahead of the Lunar New Year, essential consumer goods were generally sufficient in supply and stable in price, with food prices remaining flat month-on-month.
In terms of PPI, the index rose by 0.4% month-on-month in January, marking the fourth consecutive month of increase, with the growth rate expanding by 0.2 percentage points compared to the previous month. The month-on-month movement of PPI exhibited three key characteristics.
First, the continued advancement of the national unified market has driven price increases in some industries. Prices for cement manufacturing and lithium battery manufacturing both rose by 0.1% month-on-month, while prices for photovoltaic equipment and components manufacturing increased by 1.9%. Prices for basic chemical raw materials manufacturing rose by 0.7%, and ferrous metal smelting prices increased by 0.2%. The development of the unified market and efforts to reduce overcapacity have played a role in price recovery for some industries with excess production capacity.
Second, increased demand has driven price rises in related sectors. The accelerated development of digital technologies such as artificial intelligence has boosted computing power demand, leading to a 0.5% month-on-month increase in prices for the computer, communication, and other electronic equipment manufacturing industry. Within this category, prices for electronic semiconductor materials and external storage devices and components rose by 5.9% and 4.0% respectively, closely linked to growing demand from the AI industry chain.
Third, imported factors have caused divergent price trends in non-ferrous metals and petroleum-related industries. Rising international non-ferrous metal prices drove domestic prices for non-ferrous metal mining and dressing, as well as non-ferrous metal smelting and rolling, up by 5.7% and 5.2% month-on-month, respectively. The PPI fell by 1.4% year-on-year in January, with the rate of decline narrowing by 0.5 percentage points from the previous month.
Overall, the mild price rebound in January helps improve market expectations regarding demand and provides some support for capital market confidence. On the monetary policy front, the People's Bank of China released its Monetary Policy Execution Report for the fourth quarter of 2025 on February 10, emphasizing that appropriately accommodative monetary policy has effectively supported steady economic progress, reasonable growth in financial aggregates, a significant decline in financing costs, and more targeted support for key sectors.
The report stated that in the next phase, the moderately accommodative monetary policy will continue to be implemented, emphasizing counter-cyclical and cross-cyclical adjustments. It also highlighted the flexible and efficient use of various policy tools, including reserve requirement ratio cuts and interest rate reductions, to maintain ample liquidity and relatively loose social financing conditions. At the end of 2025, the year-on-year growth rates of outstanding total social financing and the broad money supply (M2) were 8.3% and 8.5%, respectively, consistently higher than the nominal economic growth rate, providing strong support for the real economy. In December 2025, the interest rates for newly issued corporate loans and individual housing loans remained at a low level of around 3.1%, with overall social financing costs steadily declining.
In terms of credit structure, resources continue to be directed toward key areas. By the end of 2025, loans to the technology, green, inclusive finance, elderly care, and digital economy industries all maintained double-digit growth, with loans to the elderly care industry surging by 50.5% year-on-year. The People's Bank of China indicated that promoting stable economic growth and facilitating a reasonable rebound in prices will be important considerations for monetary policy. Regarding the exchange rate, it will adhere to a managed floating exchange rate system based on market supply and demand with reference to a basket of currencies, maintaining exchange rate flexibility, strengthening expectation guidance, preventing risks of overshooting, and keeping the RMB exchange rate fundamentally stable at an reasonable and balanced level.
In recent market developments, with few trading days left before the holiday, A-shares showed a overall volatile rebound trend this week. The commercial aerospace sector performed relatively actively driven by event catalysts. As one of the important future directions, commercial aerospace has attracted significant market attention and has also been influenced by developments related to SpaceX.
Technological innovation remains one of the key foundations of the current slow-bull, long-bull market. At the beginning of 2026, ByteDance's internally tested AI video model, Seedance2.0, attracted attention due to its improved capability to generate multi-shot videos from text, raising market expectations for the practical application of AI video. In recent years, since models like DeepSeek gained attention, progress in China's AI field has continued steadily. From OpenAI's Sora to Seedance2.0, competition in the AI video track has accelerated, and application pathways have become clearer, also driving a recent phase of gains in the media sector.
Simultaneously, the release of films during the Lunar New Year period has provided some boost to the media sector. However, it is important to note that rallies driven by blockbuster films are often short-term. Investors should pay attention to timing and risks, avoiding chasing rallies and panic selling. Only if companies can consistently produce high-quality content will the alignment between performance and valuation be more sustainable.
The Lunar New Year is also a traditional peak consumption season, typically concentrating sales of baijiu (white liquor), which may lead to a temporary recovery in consumer sectors like branded baijiu. Branded consumer goods generally possess relatively strong profitability and ample cash flow, making them more suitable for investors seeking long-term stable returns. From a dividend yield perspective, some consumer stocks are also regarded as having strong dividend attributes.
As some time deposits mature this year, the trend of household savings shifting toward the capital market may become more apparent, bringing incremental funds to A-shares. Recently, the commercial aerospace sector has remained active, fueled by news and sentiment, with trading activity heating up. However, increased short-term volatility requires investors to remain cautious about timing and risks, avoiding the danger of buying at high levels. Meanwhile, based on individual risk preferences and portfolio structure, investors could focus on traditional blue-chip stocks with lower valuations and higher dividend yields to capture potential rotation opportunities.
Looking ahead to the period around the Lunar New Year, the market is expected to gradually begin a spring rally. Investors can, while controlling risks, allocate around high-quality stocks and funds to strive for certain property income. The wealth effect generated by a slow-bull, long-bull market can also help boost consumption and drive economic growth.
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