China’s slips into deflation as prices fall for first time since early 2021

In July, the consumer price index in China experienced a descent of 0.3 percent, following a steady period in the previous month.

Consumer prices in China have experienced a decrease for the first instance in over two years due to a slowdown in spending, which is hindering the economy's recuperation after the pandemic.

According to data released by the National Bureau of Statistics on Wednesday, the Chinese economy entered a period of deflation as the Consumer Price Index (CPI) experienced a 0.3 percent decrease in July after staying unchanged in the previous month.

The decrease in prices is the most recent indication of a worsening future for the global economy's second-largest state. After suffering a 14.5 percent drop in exports last month, marking the third consecutive decrease and the largest decline in three years, the economic situation in this country is becoming increasingly concerning.

In the later part of 2020 and the early part of 2021, China had a brief period of deflation as the prices of pork drastically dropped throughout the nation.

Economists generally perceive deflation unfavorably since decreased prices usually result in diminished consumer expenditure and decreased output, consequently leading to workforce reductions and salary reductions.

China's economic growth has decelerated due to decreased demand domestically and internationally following a rapid recovery from the COVID-19 crisis and stringent pandemic restrictions earlier in the year.

Beijing has unveiled a series of policy measures designed to bolster the economy, which encompasses increased assistance for private businesses. More policies are anticipated to be introduced in the following weeks.

Zhiwei Zhang, the lead economist at Pinpoint Asset Management in Hong Kong, informed the Reuters news agency that the strength of the economy is diminishing as a result of underwhelming domestic purchasing power.

It remains uncertain whether the recently announced policies have the ability to swiftly reverse the economic momentum. The decrease in Consumer Price Index (CPI) might add more strain on the government, compelling them to contemplate implementing further fiscal stimulus to alleviate the predicament.