Inflation Trends and Incentives in China

China's Consumer Price Index (CPI), the primary indicator of inflation, showed a change in August 2023, according to the National Bureau of Statistics.

On a monthly basis, the indicator increased by 0.3 per cent compared to the previous month, while the year-to-date average value increased by 0.5 per cent.

The Producer Price Index (PPI) experienced a 3 per cent annual contraction, in line with expectations, following a 4.4 per cent decline the previous month. Additionally, trade data indicated a reduction in both exports and imports, adding to a series of other indicators that suggest a challenging phase for the Chinese economy.

In the weeks prior, the Beijing government in an effort to attract new investment, confirmed a series of tax incentives for small businesses, extended until December 2027. Companies with profits up to three million yuan, equivalent to approximately 380,000 euros, will be subject to a 5 per cent tax rate instead of the usual 25 per cent for 2023 and the following four years. This is a special tax rate lower than even the taxation regime in Singapore and Southeast Asian countries.