NewsChina faces a significant challenge: it can't stall the decline in prices

China faces a significant challenge: it can't stall the decline in prices

China is struggling with deflation.
China is struggling with deflation.
Images source: © Getty Images | Pool
ed. PRC
9:22 AM EST, December 11, 2023

While many central banks worldwide strive to combat inflation, China finds itself wrestling with the opposite concern this year - falling prices or deflation.

Beijing has called for immediate measures to stimulate demand and forestall a downswing in prices, reports CNN Business. On Friday, China's high-ranking officials convened in a Political Bureau meeting, vowing to make further efforts to encourage domestic demand and consumer spending.

Deflation is the key issue

The National Bureau of Statistics revealed that the Consumer Price Index (CPI), a measure of the average change in prices over time of goods and services, fell by 0.5 percent in November compared to the previous year. This decrease is the largest since November 2020.

China's deflation, a downward trend in prices, is picking up speed. In October, the CPI decreased by 0.2 percent compared to the same month last year.

As CNN has highlighted, consumer inflation has been in decline since February, hitting negative levels in July for the first time in a span of over two years. Although it bounced back to positive figures in August, it stayed constant in September, only to dip below zero once again in October.

A triple whammy

China's deflationary situation worsens with a triple blow triggered by domestic food prices, international oil price adjustments, and weak domestic demand - according to analysts at Citi in their most recent report.

This pressure from deflation casts a shadow over economic recovery in China. "There's no room for political dithering in stopping a malicious cycle between deflation, confidence, and activity," warned the Citi analysts.

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