The Chinese yuan was little changed in Asian trading after the world’s second-largest economy reported the fastest pace of inflation in nearly three years in December. After strengthening 5% over the last 12 months, the yuan has been relatively flat in the early days of 2026.

According to the National Bureau of Statistics, China’s annual inflation rate rose for the third consecutive month to 0.8% in December, up from 0.7% in November. This marked the highest level of 12-month inflation since February 2023.

The market consensus pointed to a 0.9% reading.

On a monthly basis, consumer prices rose 0.2% following a 0.1% drop in November.

Core inflation, meanwhile, was unchanged at 1.2% year-over-year. China’s core inflation measurement strips out volatile food and energy prices.

Producer inflation remained in deflationary territory, coming in at negative 1.9% year-over-year in December. This was slightly below economists’ expectations of negative 2% and improved from negative 2.2% in November.

Despite rising Chinese inflation, economists largely expect consumer inflation to remain flat in 2026. However, producer deflation will likely worsen in the year ahead, with Larry Hu, chief China economist at Macquarie, forecasting a 2.7% decline.

For the past two years, China has been grappling with deflation as consumers continue to remain reluctant to spend amid economic uncertainty, stemming from a series of headwinds, including a property crisis, weakening manufacturing, trade strife, and a deteriorating employment outlook.

The central government and the People’s Bank of China have been rolling out fiscal and monetary support measures to bolster demand and stimulate economic activity.

The USD/CNH currency pair dipped 0.06% to 6.9776, from an opening of 6.9822, in overnight trading. The EUR/CNH currency pair dropped 0.14% to 8.1303, from an opening of 8.1416.