At the same time that Japan is emerging from long-term deflationthe China is in danger of slipping into the economic trap from which the Land of the Rising Sun managed to escape recently. The world’s second-largest economy has struggled for most of this year to stem a price slump, just as it did in Japan 30 years ago. Prices fell again in October by 0.2%, marking their 13th straight month of decline.
Many financial analysts are quick to draw attention to Beijing stressing that it must take immediate steps to avoid Japan’s experience and take care to stimulate consumer demand and fully liberalize private enterprise. Consumer prices fell for the first time in July and have been on the edge of a steady decline ever since, consistently belying the Bank of China’s hasty forecast that they would rebound immediately after the end of the summer. As producer prices fall at the same time, calls from international organizations and economists for urgent measures against deflation are steadily intensifying. Commenting on the relevant issues, Bruce Pang, economist – China expert at Jones Lang LaSalle, emphasizes that “Chinese authorities and policy makers have long faced a major challenge as they try to fight deflation amid reduced demand.”
Its causes deflation in China they are mainly due to domestic factors such as the housing market crisis and falling consumer confidence. However, factors from the international environment, such as the drop in commodity prices from last year’s high levels and anemic global demand for Chinese products, also play a role. New factors have recently been added, such as the fall in the price of pork, which is the most consumed meat in China – with its price having a significant impact on the overall consumer price index. Pig farmers have recently increased pork production, anticipating that after the lifting of restrictive measures against the pandemic, the demand for meat would increase significantly. They fell out, however, as the recovery in demand fell short of expectations. Thus, food prices have fallen overall by 4% compared to the corresponding period last year, while structural inflation increased by just 0.6%, recording a slowdown compared to last month, when prices had increased by 0.8 %.
