Inflation in China has been persistently low even after the economy reopened, raising widespread concerns about deflation risks. This analytical note provides a deep dive into the issue of low inflation in China. We examine recent inflation dynamics along with the key drivers. Our analysis suggests that deflationary risks are rising but not as severe as Japan’s case in 1990s. The low inflation in China reflects a disinflation process, primarily driven by a stronger recovery on the supply side than on the demand side, coupled with intense competition in consumer products. The property market downturn so far has not resulted in broad deleveraging of the household and corporate sector, and financial tightening.