Is China's deflation signalling stagnation?
Mint Editorial Board Producer prices dropped sharply in June; China could slip back into deflation at the retail level too. Amid trade turmoil, its economy faces a rough ride. Let's keep watch and look for opportunities. Beijing has used state money to support demand, but prices dropping beyond real estate, where a bubble popped some years ago, suggest slumps across sectors. Gift this article
As countries turn inward, the damage that trade reversals can do to economies may have begun to show in China. Its data shows it has replaced exports to the US with shipments elsewhere to quite an extent lately, but its demand weakness within seems to be getting worse.
As countries turn inward, the damage that trade reversals can do to economies may have begun to show in China. Its data shows it has replaced exports to the US with shipments elsewhere to quite an extent lately, but its demand weakness within seems to be getting worse.
Also Read: Mint Quick Edit | Deflation is bad news for China's economy
On Wednesday, the country reported a 3.6% drop in producer prices this June, marking the biggest fall in about two years. Consumer prices edged 0.1% higher last month, but it also meant China was a whisker away from slipping back into deflation at the retail level.
Beijing has used state money to support demand, but prices dropping beyond real estate, where a bubble popped some years ago, suggest slumps across sectors. China is vulnerable to weak import demand globally and may find it hard to avert a slowdown as shipments lose pace amid tariff turbulence.
Also Read: Stay vigilant: China's economic woes could spill over
Some China-watchers see it headed the way of Japan, where deflation heralded stagnation in the 1990s. But the economic lessons of that era have been learnt and Beijing has greater strategic autonomy than Tokyo did. As China's rival, India must watch Beijing's moves even as it explores new opportunities for cooperative rivalry with it. Topics You May Be Interested In Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
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