daniel chigunwe
CHINA has failed to break a deflationary cycle and is now on track for the longest streak of economy-wide price declines since the 1960s, analysts say, exposing a key vulnerability likely masked by a growth upswing at the end of last year.
Deflation persisted for the second straight year in 2024, official data due Friday is set to show, according to most economists.
Some of the biggest Wall Street banks including JPMorgan Chase and Citigroup are predicting it will linger to 2025 — marking a stretch unseen since the end of Mao Zedong’s Great Leap Forward campaign, which plunged China into recession and caused a famine that killed tens of millions.
While growth is still expected to have expanded at a faster clip in real terms in the final quarter, the gross domestic product deflator — the broadest measure of price changes in an economy — will reach minus 0,2 per cent in 2025, according to the median forecast of 15 analysts polled by Bloomberg. That compares with 3,4 per cent on average in the decade before the pandemic.
“Stimulus, stimulus, stimulus, particularly on the fiscal side, is very much needed in China,” said Frederic Neumann, chief Asia economist at HSBC Holdings in Hong Kong. “We have seen in other economies a big policy push is needed to permanently get out of disinflation. And that’s something we think will gradually happen in China, but very gradually indeed.”
A looming trade war with the US could make China’s plight worse if exporters have to find domestic buyers in the face of obstacles abroad. The data on Friday, which will also give a snapshot of the troubled property market and retail sector, comes just days before Donald Trump returns to the White House threatening tariffs as high as 60 per cent that could decimate trade with the world’s No 2 economy. — Bloomberg.
Online Reporter
