People’s Republic: Consumer prices in China fell

People’s Republic: Consumer prices in China fell

In China Prices fell more sharply at the beginning of the year than they had in more than 14 years. The Consumer prices fell for the fourth consecutive day in January, according to data from the National Bureau of Statistics (NBS). At 0.8 percent, the decline was the highest since September 2009 – at the time of the global economic crisis. Experts had expected a smaller minus. This means that deflationary pressure remains high in the world’s second largest economy.

The statistics office attributed the year-on-year difference to the Chinese New Year, as that is a key driver of consumption. The festival, which is based on the lunar calendar, fell on January 22nd last year, but this year it does not begin until next weekend. Millions of people travel or shop for the celebrations during this time.

While consumer prices continued to fall year-on-year, they rose 0.3 percent month-on-month – for the second month in a row. However, concerns about a deflationary spiral remain. While in most industrialized countries it is rather high inflation The purchasing power of consumers can be inhibited by the deflation consumer restraint can set a downward spiral in motion.

China is struggling with weak consumption

Many economists consider deflation to be more dangerous for the development of an economy than slightly rising prices. At first glance, consumers benefit because they have to pay less for goods and services. However, deflation usually also puts pressure on companies’ profits and therefore poses the risk of wage cuts and layoffs.

Since then the People’s Republic dropped the tough Corona measures at the end of 2022, it is having difficulty returning to its economically strong period before the pandemic. Consumption in the country of around 1.4 billion people remains weak. Foreign investors also have less confidence in the economy and are withdrawing their money, which has recently been reflected in falling prices on the stock exchanges China was observed.

On top of that, a heavy one brakes Real estate crisis the engine of the Chinese economy. The government recently took countermeasures, for example by relaxing regulations for banks regarding cash reserves, which should make it easier to grant loans.



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