Update | Slump in factory gate prices extends to record length as China’s economy slows

China’s factory gate prices extended their falling streak to 47 months in January, indicating persistent deflationary pressure and fuelling calls for further supportive policies to counter economic headwinds.

Experts said economic deterioration would lag structural adjustment so Beijing should focus more on monetary and fiscal policies to counter downward risks than on supply-side reforms.

Producer prices fell 5.3 per cent in January year on year, smaller than the fall of 5.9 per cent in December, the National Bureau of Statistics said.

READ MORE: China’s inflation edges up 1.6 per cent in December as food prices rise, pork jumps 9.5 per cent

But the improvement was largely due to a lower base of comparison – economists said deflationary pressure remained substantial and there were no signs of a quick recovery.

Steel, coal, and non-ferrous sectors have suffered losses across the board with falling prices and weak demand.

Rises in non-performing loans, declines in manufacturing profits, and government efforts to address excess capacity have all added pressure on the economic outlook.

Producer price index deflation was expected to last another two years, as were government efforts to address excess capacity and reduce the number of unsold apartments, said Zhao Yang, chief China economist with Nomura Securities.