China experiences deflation, raising concerns for the worldwide economy

China has entered a phase of deflation as the world’s second-largest economy grapples with reigniting demand following prolonged zero-Covid strategies.

The National Bureau of Statistics (NBS) reported a 0.3% decline in the consumer prices index over the year to July.

This marks the first annual decrease since February 2021, with inflation remaining stable in June.

Deflation represents a drop in the prices of goods and services, and can be attributed to several factors, including reduced consumption.

Furthermore, China indicated that its factory gate prices continued to diminish. The producer prices index (PPI) saw a decrease for the 10th month in a row, dropping 4.4% year-on-year after a 5.4% reduction the month before. This contrasts with an anticipated drop of 4.1%.

These statistics arise amidst growing concerns that China might be heading towards a prolonged phase of slower economic growth, reminiscent of Japan’s “lost decades” from the 1990s, a time when consumer prices and wages remained stagnant for years. Recent data also highlighted weak import and export figures from China.

China’s economic figures impacted Asian stock markets, which primarily witnessed a drop, reaffirming the slowing momentum of China’s economic resurgence

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