Prices — is it time for them to rise?

Government signals a modest inflation target

China’s government has set an explicit price-rise target of about 2% in this year’s government work report, a number that has puzzled some consumers who want cheaper goods. Chen Changsheng (陈昌盛), deputy director of the State Council Research Office (国务院研究室) and a member of the report drafting team, told a state briefing that modestly higher prices are intended to break a damaging cycle: if prices keep falling, firms cut investment and hiring, and households — who are both consumers and workers — ultimately face weaker wages and fewer jobs. Short and blunt: low consumer prices feel good today. They can feel very costly tomorrow.

The ideological and policy push for a “reasonable rebound”

A commentary in Qiushi (《求是》) last month argued the same point more systematically, saying China should “actively promote a reasonable rebound in prices” because price levels are closely tied to employment and wages. The article warned of a deflationary spiral — low prices, weak expectations, reduced consumption, falling corporate profits, and weaker fiscal revenues — that could blunt conventional monetary policy. Policymakers are therefore threading a needle: encourage consumption while nudging prices up enough to restore corporate margins, fiscal health and stronger household incomes.

Why China’s consumer prices have been uniquely low

Why has China been a “low-price” society even at relatively high living standards? The article argues this is structural, not merely a function of low wages. It cites 2025 data showing China’s giant logistics and manufacturing footprint: inland freight of about 51 billion tons (roughly 70% of the global total), 1,990 billion express parcels (about 66% of global volume), and 13.87 million new-energy vehicle sales (about 65% of global supply). Appliance production shares are similarly dominant — air conditioners ~80%, TVs ~65% — and China accounts for roughly half of global industrial power consumption. Scale creates huge learning-curve and network effects that push unit costs down. The result: in many everyday categories, modern life in China costs less than in other countries.

Tech bottlenecks and geopolitical context keep some prices high

But not all prices can be tamed by scale. The article notes that high-end industrial and semiconductor equipment remain constrained — for example, China’s semiconductor push is held back by the lack of EUV lithography capability, forcing reliance on DUV workarounds and contributing to recent memory-price volatility, it has been reported. That shortfall is as much geopolitical as technical: Western export controls and technology restrictions have targeted key upstream tools and materials, shaping where Chinese prices rise and where they stay low. So will a 2% target be enough? Policymakers hope a modest, managed rebound will strengthen employment, corporate margins and fiscal revenues without hurting consumers too much — but the outcome depends on investment, demand and whether strategic tech gaps can be closed.