China Faces Deflationary Spiral as Consumer Prices Fall
Consumer prices fell in China in February for the first time in 13 months, driven by weak demand and the early timing of the Lunar New Year holiday. The National Bureau of Statistics reported a 0.7% drop in consumer prices compared to last year, with prices down 0.2% from January on a monthly basis. As policymakers face flat to falling prices, they risk creating a deflationary spiral that could drag down the economy.
- This slowdown highlights the vulnerabilities of China's economic model, which relies heavily on government subsidies and stimulus packages to drive growth, leaving it exposed to external shocks.
- How will China's efforts to reinvigorate domestic demand through measures such as infrastructure spending and tax cuts impact its ability to address the underlying structural issues driving deflation?