China urged to take bolder steps to tackle price wars, deflation and weak demand
price wars may help ease deflationary pressures, but analysts warn the current measures fall short of addressing deeper structural problems facing the world's second-largest economy.
China's GDP deflator – a broad measure of prices across goods and services – has been negative since the second quarter of 2023, while consumer prices have fallen for four straight months year-on-year. To stop the deflationary spiral, Chinese authorities should address the cause: weak domestic demand, analysts said.
'So far, attempts to revive inflation by trimming supply and reducing overcapacity have shown limited results,' Miao Yanliang, chief strategist at Beijing-based investment bank China International Capital Corporation (CICC), wrote in a research note.
'Weak demand remains the underlying problem.'
Despite policymakers flagging cutthroat competition as a concern at the tone-setting Central Economic Work Conference last December, there are few signs of a rebound in prices, said Miao, who previously worked as a senior economist at the State Administration of Foreign Exchange for a decade.
Miao attributed the current deflationary spiral to downturns in the financial and property sectors as well as diminishing income expectations among Chinese households.
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