Deflation has been a headache for China’s economists for months. Prices have been rising again since the beginning of the year. Some economic concerns remain.
China’s consumer prices continued to rise in April. As the statistics office in Beijing announced, the index was 0.3 percent higher than in April 2023. This means that the inflation trend in the world’s second largest economy is continuing. Compared to the previous month, consumer prices rose by 0.1 percent. In February, the price index shot up by 0.7 percent year-on-year due to the Spring Festival – an important holiday season for the domestic economy – but it fell significantly again in March.
From the fall of last year until January, China struggled with deflation, i.e. a fall in prices – the opposite of inflation. While this may initially be beneficial for consumers, economists see deflation as disadvantageous for the economy in the long term because companies earn less, which can reduce wages and put jobs at risk.
The development of consumer prices has so far underlined the weak consumption behavior of private households. There is also high unemployment among young people in the country with around 1.4 billion inhabitants. A serious real estate crisis and the high indebtedness of local governments are also slowing down the economic engine.
The Chinese are traveling more again. Data from the Ministry of Tourism showed that significantly more people went on trips during the holidays after Labor Day (May 1st) than in 2019, i.e. before the corona pandemic. However, they spend less money per capita. The government has so far found it difficult to stimulate private consumption again. Beijing refrained from large-scale economic stimulus measures. Some experts believe strong domestic consumption is a better remedy for sustainably increasing economic growth.
Source: Stern
