consumption
Deflation worries in China: prices dropped significantly
China’s consumer prices dropped significantly in February. While people in Germany have to dig deeper into their pockets, there is no noticeable decrease in China. Why is that?
For the first time in 13 months, consumer prices in China have returned significantly and more than expected. As the statistics office in Beijing announced, the consumer price index in February fell by 0.7 percent compared to the same month. Analysts had expected a decline of 0.4 percent.
The message comes during the parallel popular congress – the not freely chosen Parliament of China. There, the government said that in 2025 he wanted to achieve an inflation of around two percent and thus moved away from the otherwise set three percent goal. Observers evaluated the decision as a step towards a more realistic goal under the further oppressive deflation.
Statisticians see spring festival as a factor
The reason for the sunken consumer prices could be the higher comparison basis a year earlier. The statisticians explained the development with the spring festival, which, unlike in 2024 this year, fell to the end of January and were therefore few days in February. During the festival, millions of people travel and consume a lot that can generate a calming.
While Germany’s statisticians recently recorded an inflation of more than two percent every month, deflation in China presses the second largest economy in the world. Deflation is the opposite of inflation. This means that buyers get more for their money. Economists consider such development to be harmful in the long term, since companies earn less what can threaten wages and jobs.
China wants to encourage consumption again
China’s economy also fights with a weak demand in Germany and a low consumer confidence. Beijing wants to make people buy more again and announced about billions of grasses for an exchange program for new devices or vehicles at the People’s Congress.
dpa
Source: Stern
