April 25, 2024
World Economy

China’s deflationary trap could snare the global economy


The spectre of deflation may be returning to stalk the global economy and, much like the past two decades, the source is likely to be China.

The world’s second largest economy has been suffering from outright falling prices since last summer, marking the country’s worst deflationary spiral since the Asian financial crisis rocked the region in the mid-1990s. China’s headline consumer prices index fell by 0.8 per cent in January, the largest drop since the 2008-09 crash, while a measure of its producer prices declined for a 16th consecutive month at the start of the year.

The threat of a pernicious deflationary doom-loop setting in among Chinese households and businesses will be exercising the leadership of the Communist Party, whose senior officials begin their annual



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