China's deflation risk is increasing and signs of economic weakness are mounting the Consumer Price Index CPI in August Rose by 0.3% year- on-year marking the lowest level since 2021 the overall inflation rate was only 0.6% additional measures are needed to prevent a negative cycle of declining corporate profits wage cuts and shrinking consumption this threatens China's 5% growth Target former Central Bank Governor Yi gang emphasized the need for bold policies to combat deflation he argued that the Chinese economy requires more proactive fiscal and monetary policies including further interest rate cuts and a reduction in the reserve requirement ratio