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Lackluster Price Data Underscores China’s Deflation Risk
If authorities in Beijing weren't already under enough pressure to revive domestic demand, Xi's statisticians on Sunday braved another lackluster read on consumer price growth.
I say "braved." The implication, obviously, is that the NBS would rather deliver good news, lest the big man should shoot the messenger, figuratively or literally. Some of that's just gallows humor. I don't actually believe Xi's so far gone as to resort to threats of physical violence against bureaucratic number cruncher
So falling prices are bad?
Falling prices are indicative of a lack of demand as Sellers try to encourage people to buy. People won’t buy if they see prices falling because they will wait for them to fall further. Lack of demand will result in oversupply, which can cause layoffs and may lead to factory closures, which are difficult to come back from. Instead of a vibrant, growing economy you have a stagnant economy with fewer jobs and a sense of resignation. Mr. H has been harping on this for months now, it finally sunk through my head.
“So falling prices are bad?”
Apparently! Because Xi’s sweating bullets and spending trillions of yuan to ward them off, and at various intervals, the Party’s censors reportedly banned (or at least strongly discouraged) public discussion of the d-word (deflation).
(And yes, stepping back from the sarcasm, which I only employed to match the original comment, falling prices over long periods are bad, particularly when you’re marking a transition towards a consumption-driven economy for 1.4 billion people. Ask Japan about falling prices and whether they’re good or not.)
I read that housing deinflation is a mere -0.1% in China’s stats. Hmm?