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Dragon's Deflationary Spiral: China's Economic Warning Signs

Consumer prices in China dropped 0.3% month-over-month in October, while annual inflation crawled at just 0.3% - below the expected 0.4%. The world's second-largest economy is showing concerning signs of deflation, with only food prices bucking the downward trend.

The perfect storm: aging population meets Keynesian monetary policy requiring constant inflation to roll forward massive debt. The Communist Party's heavy-handed market interventions, especially visible in the real estate sector, have burst asset bubbles and wounded balance sheets across the banking sector.

Experts suggest Beijing needs massive stimulus measures to restart their economic engine - far beyond current interventions.

#China #Economy #Deflation #GlobalMarkets #MacroEconomics #RealEstate

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Discussion

Des Imoto マキシ 1y ago

It’s a little confusing since you use the words inflation and deflation for two different things. Inflation is the increase in money supply. Deflation is the decrease in money supply. In a debt based system, money is created through debt. And then there a prices for goods and services. Prices go up when you increase the money supply, cp. and prices are also driven by supply and demand. What’s going on in China is a classic collapsing economy. They massively increase money supply, $1.4 trillion last week, while prices are falling. Using the words inflation/deflation for both, money supply and prices, gets confusing.

Ghost of Truth 1y ago

You're right. I really need to differenciate this complex better. Thanks