August 9, 2023
2 mins read

China slips into deflation

According to analysts, this adds to the pressure on the government to stimulate demand in the world’s second-largest economy….reports Asian Lite News

China’s economy has slipped into deflation as consumer prices declined in July for the first time in more than two years, the media reported.

The official consumer price index, a measure of inflation, fell by 0.3 per cent last month from a year earlier, reports the BBC.

Analysts said this increases pressure on the government to revive demand in the world’s second largest economy.

This follows weak import and export data, which raised questions about the pace of China’s post-pandemic recovery, the BBC reported.

The country is also tackling ballooning local government debt and challenges in the housing market.

Youth unemployment, which is at a record high, is also being closely watched as a record 11.58 million university graduates are expected to enter the Chinese job market this year.

Falling prices makes it harder for China to lower its debt – and all the challenges which stem from that, such as a slower rate of growth, analysts said, the BBC reported.

“There is no secret sauce that could be applied to lift inflation,” says Daniel Murray from investment firm EFG Asset Management.

He suggested a “simple mix of more government spending and lower taxes alongside easier monetary policy”.

Most developed countries saw a boom in consumer spending after pandemic restrictions ended. People who had saved money were suddenly able and willing to spend, while businesses struggled to keep up with the demand.

The huge increase in demand for goods that were limited in supply — coupled with rising energy costs after Russia’s invasion of Ukraine — inflated prices.

But this is not what happened in China, where prices did not soar as the economy emerged from the world’s tightest coronavirus rules. Consumer prices last fell in February 2021, the BBC reported.

In fact, they have been at the cusp of deflation for months, flatlining earlier this year due to weak demand. The prices charged by China’s manufacturers — known as factory gate prices — have also been falling.

“It is worrisome as far as it shows that demand in China is poor while the rest of the world is awakening, especially the West,” Alicia Garcia-Herrero, an adjunct professor at the Hong Kong University of Science and Technology, said.

“Deflation will not help China. Debt will become more heavy. All of this is not good news,” she added.

ALSO READ: China’s exports fall again, impeding Its economic recovery

Previous Story

Indian-born student first GOP in Wisconsin Senate race

Next Story

India Looks Lucrative in the Global Economic Charts

Latest from -Top News

Uganda’s President Museveni to seek reelection

The upcoming general elections will not only determine the presidency but also see voters elect lawmakers to the national assembly Uganda’s President Yoweri Museveni is set to seek reelection for another term

Eritrea seeks to end UN probe into abuses

The mandate in question is held by the Special Rapporteur, a position currently occupied by Sudanese human rights lawyer Mohamed Abdelsalam Babiker In a rare and potentially precedent-setting move, Eritrea is attempting

Alps Turn to ‘Swiss Cheese’

Switzerland’s reliance on glacial runoff for hydroelectric power faces growing risk — as glaciers shrink, short-term water flow may rise, but long-term shortages could threaten energy and water supplies. Switzerland’s glaciers —

Burn Notice for Europe

As summer unfolds, Europe is bracing for what may be the first of many extreme heatwaves. Europe braced for its first major heatwave of the northern hemisphere summer on Saturday, with soaring
Go toTop

Don't Miss

China issues rainstorm alert

These regions are likely to encounter over 60 mm of

Biden’s Putin fixation strains ties in Asia

Several of Biden’s current policies are helpful to the PRC