consumption
Customs and deflation: pressure on China’s economy is growing
Consumer prices in China continue to fall. If you go shopping, you may be happy about it – but the government wants the opposite. Because the development has dangers to the economy.
Despite measures to increase consumption, China’s consumer prices continue to decrease with the United States during the ongoing trade dispute. The consumer price index, also known as inflation rate, fell 0.1 points compared to the same month in April, as the statistics office in Beijing announced. The indicator was thus about the same with analyst expectations.
Deflation signs for China’s problems
Deflation, i.e. the opposite of inflation, has long been pressing consumer prices in China. They have hardly changed for months, while other countries are fighting with high inflation rates. Chinese buyers get more for their money. Economists consider such development to be harmful in the long term, since companies take less, which can threaten wages and jobs.
The government in Beijing is aiming for an inflation rate of “around two percent” this year. However, the weak demand as a result of the real estate crisis in China and the high unemployment among young people put a strain on economic performance – this in turn presses the prices. Most recently, China’s central bank announced interest reductions so that commercial banks can spend more loans in order to boost the economy.
Effects in the customs dispute with the USA
On the one hand, the price development can make Chinese products cheaper abroad. On the other hand, the trade conflict with the United States could also lead companies to sell their products in China instead of exporting them. That would tighten the price war in Germany.
For the first time since the beginning of the customs dispute triggered by US President Donald Trump, representatives of both sides want to talk about the trade conflict at the weekend. US Finance Minister Scott Bessent and China’s Vice Prime Minister He Lifeng are said to be at the meeting in Switzerland.
The trade conflict between the two largest economies was escalated in April. Trump imposed 145 percent additional tariffs on Chinese imports, which countered China with 125 percent additional surcharges on imports from the USA.
dpa
Source: Stern
