Is China Falling Into a Deflationary Spiral? → Washingtons Blog
Is China Falling Into a Deflationary Spiral? - Washingtons Blog

Monday, May 11, 2009

Is China Falling Into a Deflationary Spiral?

Leading thinkers are today debating whether or not China is experiencing deflation.

The Telegraph writes:

It was the third month of deflation in a row ...

However, commentators said accelerating money supply, combined with an enormous surge in bank lending, meant that prices were unlikely to keep falling in the long term and would probably start rising again by the end of the year.

Mish - a leading proponent of the theory that global deflation is the trend for the foreseeable future - believes that China will get dragged down by deflation:

Consumer prices are falling year over year in China. Bear in mind that falling prices do not constitute deflation which is a monetary phenomenon (a reduction in money supply and credit) not a price phenomenon. In this case we see both.

1 comment:

  1. What happens when Chinese government spends its stimulus money, when the Chinese people get all the TV sets and cell phones they ever wanted. Where will the future demand come from? Seems like the Chinese are going to overdose themselves on stimulus and dig a grave for their economic future now.


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