China’s Persistent Deflation and Dovish Policy Spur Crypto Market Focus Amid Global Trade Uncertainty

China’s consumer price index (CPI) decreased by 0.1% year-on-year in May 2025, marking the fourth consecutive monthly drop and heightening concerns over sustained deflation in the world’s second-largest economy. Yearly core inflation, which excludes food and energy, edged up by 0.6%, indicating limited underlying price growth. The producer price index (PPI) fell sharply by 3.3%—the largest drop since July 2023—underline mounting deflationary pressure. This persistent weakness is attributed to sluggish domestic demand, declining property prices, and intensifying price competition, especially in the automotive sector. Despite prior interest rate cuts, China’s central bank is now considering further easing measures, such as lowering the banks’ required reserve ratio (RRR), to reignite growth. Recent partial rollbacks of trade tariffs with the U.S. add a layer of uncertainty, even as Chinese officials resume high-level trade talks to stabilize economic relations. For crypto traders, China’s ongoing deflation, dovish monetary outlook, and yuan depreciation risks may spur further global capital movement into risk assets such as digital currencies. However, the potential for macro volatility persists, particularly if stimulus efforts fall short or trade tensions flare up once more.