Why Chinese remain cautious despite inflation drop

Inflation rates in China unexpectedly declined in July, reaching a year-on-year increase of 3.5%, the lowest level since the beginning of the year compared to over 4% in June. This decline is due to falling energy prices, especially gasoline, following a drop in production costs for the first time since the start of the US-Iran conflict. Meanwhile, exports rose by 23.9% driven by demand for tech products. However, domestic consumption remains weak due to economic uncertainty and citizens’ concerns, reflecting cautious spending behavior. Economic experts indicate that China's economy is not experiencing a full-blown recession but is facing challenges in stimulating growth and manufacturing due to rising oil prices and weak domestic demand.

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