China's deflationary pressures are intensifying, posing a significant threat to its economic stability. Despite a slight 0.6% rise in the consumer price index in August, largely driven by food prices, core inflation remains weak, with core CPI growth at just 0.3%. Industrial producer prices fell by 1.8%, marking the largest decline in four months, particularly impacting the steel sector. The former central bank governor Yi Gang has called for 'proactive fiscal policy' and 'accommodative' monetary measures to counter these deflationary forces, yet the People's Bank of China has been hesitant to implement drastic rate cuts due to concerns over currency devaluation and bank profitability. Investor sentiment remains bearish, with major financial institutions downgrading their outlook on Chinese stocks. Analysts warn that without more aggressive policy intervention, the deflationary spiral may further undermine China's goal of achieving 5% economic growth this year.