Deflation Hits China for the First Time in Two Years

China has entered a deflationary phase for the first time in two years due to weak consumer demand and escalating economic concerns, prompting calls for Beijing to take stronger actions to counter the economic downturn. Contrary to the inflationary trend in the U.S. and other Western economies post-Covid, China is witnessing declining prices across various products. This could benefit global inflation rates as Chinese exports become cheaper but may negatively affect other countries' producers and job opportunities. A lack of consumer confidence, due to Covid uncertainties, regulatory changes, and concerns about the property market's health, is expected to keep inflation subdued. Moreover, the property market downturn has affected consumption as homes are a significant source of wealth for many, making them sensitive to price fluctuations. Despite these concerns, China's policymakers appear unconcerned, with only minor rate cuts introduced. Experts, however, are warning against the risks of the current approach.