October 17, 2025

China's ongoing deflation puts pressure on pork producers and policymakers 

Pork prices in China are tumbling, dragging down overall food costs and fueling new deflation fears — just as rising global tensions threaten to complicate the central bank's response.

China's producer price index fell 2.3% in September – an improvement on last month but still pointing to persistent deflation. Consumer prices slipped 0.3%, driven by a sharp 4.4% drop in food costs, especially pork. Major suppliers like TianYu Eco-Environment and Beijing Dabeinong Technology have already reported shrinking sales as wholesale pork prices tumble. This broader deflation signals China's economy is still under strain, which technically gives the People's Bank of China (PBOC) space to ease rates. But with US-China trade tensions heating up – thanks to new threats of 100% US tariffs after China's rare earth restrictions – policymakers might keep rates on hold until after the planned Trump-Xi talks in South Korea.

Investors are keeping a close eye on Chinese stocks and commodities, as deflation squeezes corporate profits and hits confidence. Pork producers' shares have already fallen on weaker sales. While a rate cut from the PBOC could give markets a short-term pop, much depends on the outcome of US-China negotiations. Any tariff escalation or failed talks could mean more volatility for global investors.

Trade tensions are flaring just when China's economy is showing its soft spots. If US tariffs ramp up and stimulus gets delayed, weaker Chinese demand could send ripples through global supply chains, putting pressure on both emerging and developed economies around the world.

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