- China is facing deflation, increasing calls for government stimulus to boost the economy.
- Consumer prices rose 0.4% in September, while producer prices dropped 2.8%.
- China’s challenges include a collapsing property market, rising youth unemployment, and export risks.
Chinese officials are pressured to stimulate the economy after new deflation data. In September, the consumer price index increased by 0.4% due to food prices rising from bad weather, below the expected 0.6%. Producer prices saw a notable decline of 2.8%, the largest in six months.
Key issues affecting the economy include:
- Slowed economic growth, threatening wages and job security amid high youth unemployment and a crackdown on Big Tech.
- Exporters are worried about potential higher tariffs and limited access to advanced technologies.
- The collapse of the property bubble has decreased home values, straining local governments and related industries.
Despite these challenges, Goldman Sachs slightly increased China’s GDP-growth forecast to 4.9% for this year and 4.7% for next year. The anticipated government stimulus package has helped boost Chinese stock markets, although details remain scarce.
China’s leader, Xi Jinping, may be cautious about excessive stimulation due to past contributions to the property bubble. Analysts note that both Xi and investors understand the necessity of stimulus to address the ongoing property crisis and associated deflation.
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