China's producer price index (PPI) fell 3.6% year-on-year in June 2025, marking the steepest decline in nearly two years and deepening deflationary pressures. This drop widened from May's 3.3% decrease and reflects ongoing weak domestic demand, overcapacity, and intensified price wars among companies. The deflation at the factory gate is compounded by uncertainty stemming from the global trade war, particularly with the United States, which has further strained the economy. Consumer price inflation remained subdued, rising only 0.1%, with deflation persisting outside the metals sector. In July, China's manufacturing activity contracted for the fourth consecutive month, declining more than expected amid weak demand both domestically and abroad, as well as adverse seasonal and weather conditions. Policymakers face mounting pressure to introduce additional stimulus measures to stabilize the economy amid these challenges.