Chinese economy expected to have slipped into deflation as recovery falters
Chinese economy expected to have slipped into deflation as recovery falters
Some forecasters predict consumer price inflation data due to be released will show prices fell by 0.4% year-on-year in July
"But deflation can hurt economic growth, as consumers will delay purchasing products if they think they will be cheaper in future."
Not if people are already mostly only buying what they need to survive.Which is not the case for most people and certainly not the case for businesses and banks.
With all of this deflation, how is China supposed to send more balloons?
They’ll just start buying cheaper balloons from China.
F22 doesn't want to be fed. F22 wants to hunt.
Underrated comment!
Using the word "deflation" like it's a bad thing for citizens to be able to afford the things they need to live. That's capitalist propaganda for you. We're only happy when the blessedly wealthy get to have a good life.
You don’t see how it’s a bad thing for people to have zero incentive to put money back into the economy? Everyone hoarding money and trying to spend as little as possible will surely have good results!
People still need things, just because their money is getting more valuable doesn't mean they're gonna skip this weeks groceries, the next haircut, car repairs, etc. This isn't a problem that's going to grind an economy to a halt, especially a command economy. The more worrying thing for China I'd imagine would be the total exports dropping which is also supposedly happening.
It's hilarious to see: Most Capitalists (or atleast those who are not actively opposing fossil fuel industry) complain about Doomers for the climate, but the moment the line stops going up you guys become Doomers yourself.
I have seen how capitalists scream when the line stops going up. But I never see capitalists suggest changes to how the economy is setup to avoid this phenomenon. I don't trust people who can't be objective when their baby has made a booboo.
So long as unemployment stays relatively stable, deflation might be a good thing for us. If unemployment rises significantly as a result of deflation, then the discounts we'd get might not be worth the lost income. Since employers control employment in the lack of unions, they hold the power to remove income from workers to offset the falling profits that result from deflation. I wouldn't mind extra deflation if I lived in a union country.
Youth unemployment is already really high in China. With deflation, you could expect unemployment to also rise in other age groups.
It's a bad thing because the economy slows down and companies have less income, which means less pay for the workers.
Yer it wont trickle down!
Companies have been making record profits for years and wages have stagnated, which means less pay for workers.
Your employer also makes less which means a lay off or reduced pay. It's good for banks though since they make good returns on existing loans and do not have to lend it any new money to see good returns. Glad you want things to be good for bankers.
But they won't because people are expecting prices to drop even more. Food and necessities, sure, it's kinda nice this month for that, but washing machines, a new TV? Better next month. And then the next. And then you don't have a job any more because you're working at a washing machine factory and nobody's buying them and the economy is going under.
Deflation being bad is one of those (rare) instances where mainstream economics actually is right. Of course inflation is bad, too, but there's a reason central banks tend to set targets just a percent or two into inflation: That's way better than risking deflation.
The current rounds of layoffs in the last couple years have noting to do with people not buying washing machines from the washing machine factory... It has to do with the washing machine CEO saying that we have too sell 200% MORE washing machines this year compared to last OR we're going to call that "nobody's buying washing machines".
You're quoting theory while ignoring the failed reality around you.
No washing machine factory has lost any money, they just didn't make as much profit as they hoped for - even then, plenty of them are seeing record profits and still doing layoffs and raising prices to consumers artificially to exploit the pandemic profiteering moment and juice their stock price.
Unless China's mode of production changes very quickly, deflation will probably be a bad thing; in a capitalist system, labour is also a commodity not immune to deflating.
Unlike commodities though, labour tends to take exception to this happening.
I'm not reveling in China's issues, I just don't want to celebrate an imaginary win just because capitalism sucks.
In an economy as tightly controlled as China, how much does deflation even matter?
Also I wonder how everywhere else having inflation will interact with this. Is China just getting affected because the rest of the world can't afford basic necessities anymore? The article kinda touches on reduced demand from countries with inflation abroad causing this, but also doesn't really explain anything other than going "lower number is uh bad"
China has built out enough infrastructure where it really needs consumer demand to take over as a major economic engine.
Nah, that is liberalism. https://thenextrecession.wordpress.com/2023/08/02/china-consumption-or-investment/
it matters to the people whose lives it impacts, and they're not going to be happy about the impacts.. of course deflation can occur.. they will try to use artificial means to control it, but they will still have to choose how to pay for things.. they can't produce things for free just because the economy is controlled.. it's a dire circumstance for them as their property market collapses, and unemployment is at insane levels.. deflation is a nightmare in that scenario, because it is the further contraction of an already faltering market..
If the deflation is just a market correction after exaggerated inflation (retailers raising their prices more than general inflation to increase their short term subs) then it's no big deal. Prolonged deflation can be bad, as that causes too much saving and not enough spending, which can really hurt the economy and people because of how it takes money out of circulation.
In an economy, the more money can circulate, the more good it can do. I use my salary to pay for for and things, that money then pays the employees of the businesses I went to, and those employees also spent that money, and so on. At each step, both participants normally get a net benefit: I can eat, and the employee can also spend the money they get from me to eat, etc. As long as the money circulates, it keeps doing good. When it stops circulating, due to being put into savings, investments or real estate, it stops doing good (or it does less good). The cycle slows down or stops.
That's why a small amount of inflation (maybe 1-2% ? Not sure what's optimal) is actually healthy, because it puts pressure on people with money to spend it before it loses its value, instead of hoarding it.
This is the opinion of most macro economists today, but it's not universally accepted. Macro-economics is not nearly as scientific as micro-economics, and some people will say that its models are just about who can tell the most convincing story (or the story that's the most convenient for those in power)
There are some people who point out that things like electronics have been undergoing rapid deflation for decades and this has not caused people to stop purchasing them. The economy is a chaotic system and anyone who claims to be able to predict it's outcomes is selling something
Electronics also have become vastly better for decades as the tech developed. The PCs I bought over those decades are magnitudes apart in performance, but washing machines? Sure they've become more efficient but in the grand scheme of things that's peanuts, amortises over a decade maybe, at best. Stove? Sure induction is nice but it's not like others don't boil water basically as quickly. Why should I buy a new one now when I will get an identical product next month at lower price. And then the next... that is, as long as my machine doesn't break down, during deflation, I just won't buy.
"Won't someone think of the retailers?!"
Guess which political economic form can handle price deflation gracefully (hint, it's not capitalism)
Ah yes, China, the city on a hill of Socialism where striking FOXCONN workers are beaten by cops.
LOL, imagine a socialist country where workers needed to organize to create adversarial relationships with other workers. Shake that liberalism from your brain. Unions are an organizational form against capitalists, a protorevolutionary form that wins through threat of harm to the state. No socialist country needs to have unions, because a socialist country is one in which the state is organized in accordance with the long-term interests of the workers as a class.
God I wish my cost of living could deflate a bit.
Economists say its bad but I don't believe them.
I don't think you need an economist to understand why it can quickly lead to a runaway disaster... Imagine you see a car price going down every week by 1k, do you buy it this week or next week? The competitor what do you think they need to do to compete? Lower their price too but wait everybody is waiting for next week, so literally nobody is buying anymore ... So as a company you just start to fire people or close shop as quickly as possible, so a lot of people are now on the market so their labor value also goes down, ie. the salaries are dropping... This tsunami of jobless people would they buy a car this week you think? So companies need to continue dropping the prices...
Except if you think even a few more depths about this... you would understand people have needs. I would be happy to buy a car now if I need it now and can afford it. Your argument only works for goods that are not a necessity to life.
Sounds like an investor's problem.
I buy a car if I need a car, not because I want to opportunistically ride the market dips so that I've eked out a profit once the economy's gone back to being unsustainable.
Besides, consumers get ripped off by bad deals all the time.
Imagine seeing a car price go up every week. Interest rates go up a full point every 6 months. Next month you might be able to afford it but next month it's gone up 4k and another point.
Companies are making money and people keep buying cars so they keep increasing prices.
I get your point but when you as a person are removed entirely from the equation then you no longer have a stake. How many Americans have no savings, no investments and work a miserable job that doesn't pay the bills? Do you think they give a fuck if it all comes crashing down? They probably do but a lot less than everyone else.
Exept the government swoops in and gives a cash injection
These would be problems if China had a liberal economic model. Fortunately they have whole process workers democracy, and these things aren't really problems at all.
Anybody who uses democracy in the same sentence as China is a plant.
photosynthesis intensifies
What do you mean? Of course it is a democracy except that it is a one party state where people don't get a chance to choose their leaders or set policy.
I have been feeling an awful lot like an aloe vera lately.
In any case, if you're interested in learning more, here's a great place to start.
My last two brain cells dying after seeing half of the comments saying that deflation is actually good.
To be fair... us common folk keep hearing stuff about the economy.. but the only outcome at the end of the day is we get screwed in higher prices, lower wages, fucked up climate for our kids. People get tired pretending this Economy isn't rigged by wall street and the U.S Govt or people close to it.
This is the best summary I could come up with:
The Chinese economy is expected to have slipped into deflation amid signs of a faltering post-pandemic recovery, according to market forecasters.
This means retailers who stocked up on goods expecting a surge in demand after pandemic restrictions were lifted are now under pressure to cut prices.
Homin Lee, senior macro strategist at Lombard Odier, predicted July’s CPI inflation report could show “outright deflation”, with prices slightly lower than a year ago.
In the UK, consumer prices were 7.9% higher than a year ago in June, as households suffered a long run of falling real incomes.
Trade data released on Tuesday showed that China’s imports and exports both fell more sharply than expected in July, adding to concerns over the world’s second-largest economy.
Jim Reid, strategist at Deutsche Bank, said the trade data highlighted that the Chinese economy is being “dragged lower by weakness in global demand and a domestic slowdown”.
I'm a bot and I'm open source!
What's up with this weird jump in cpi? And what did China do Differently to us to not have high inflation?
Investing in productive forces and quality of life for all makes for robustly strong economic indicators and basically no inflation problem. Cutting rentierism and in large part private profits out of the economy greatly helps these figures as well, and cuts off inflation at its source.
They didn't pump hundreds of billions of dollars into the free market?
Do you think china's market is free? If so, the stated owned companies are the ones carrying the debt. Not sure how different that is to a state having the debt.
https://www.cnbc.com/2021/06/29/china-economy-charts-show-how-much-debt-has-grown.html
And what about my other question. Where does this jump come from?
Look at the 5 year view to see the jump
Democracy is always superior to authoritarianism, long term. Regulated capitalism is always superior to state owned and directed business.
Where is this regulated capitalism? Is that when the politicians are financed and then hired by the industries they're supposed to be regulating?
Democracy is always superior to authoritarianism, long term.
That's why people's democracies are rapidly developing while western dictatorships of the bourgeoisie are in crisis.
"Democracies" have delivered a constant train of 'once in a lifetime' recessions that China's regulated capitalism has somehow managed to avoid.
No, they haven't. China got hit just as hard in the 2008 recession as most western countries, and they've been robbing Peter to pay Paul ever since. Eventually Peter gets his due, and China will suffer a serious economic setback. You're starting to see signs of that now. China right now is Japan in the early 1990s. Everything from the inverted population pyramid to the looming debt crisis points to the next decade being very flat for China, and their wolf warrior diplomacy hasn't made them the kind of friends that could help pull them out of it.
That's not to say that western capitalist markets couldn't stand to be significantly more regulated, because they absolutely desperately need more regulation around safety, negative externalities, and anticompetitive behavior. But claiming that China hasn't experienced recession is preposterous. They're too economically coupled with western economies to not suffer alike as recessions hit.
China is the most democratic country in the world, full stop, with around a million elections every year.
Muray Rothbard called but it's just incoherent screaming because he's in hell for the sin of ideology.
Marx disagrees with you.
The Soviet Union does not. State capitalism is not good for the people.