2y ago

China has another massive headache now: It can’t stem deflation

www.cnn.com

China has another massive headache now: It can’t stem deflation | CNN Business

While many central banks around the world are still trying to cool inflation, China is grappling with falling prices.

The Consumer Price Index (CPI) dropped 0.5% in November on an annual basis, the biggest fall since the depths of the pandemic three years ago, according to data released by China’s National Bureau of Statistics on Saturday.

The drop marked an acceleration in the rate of deflation from October, when the CPI fell 0.2% from a year earlier, and prompted calls for urgent action from Beijing to boost demand and prevent a downward spiral of prices.

The data come days after Chinese policymakers vowed to strengthen fiscal and monetary support to boost the world’s second biggest economy, which is struggling with a real-estate crisis, high youth unemployment and subdued consumer confidence.

48 comments

Could I have some of that deflation
- Deflation tends to trigger massive layoffs since revenue drops and investment becomes a worse option than saving.
  Everyone always hopes that economic downturns will affect everyone but them specifically, but it really doesn't work that way.
  
  Meanwhile we have inflation and layoffs.
  
  It's is quite shocking how much people on the internet decry financial illiteracy, and the turn around and demonstrate financial illiteracy.
  
  I concur!
  
  Ah yes, 0.5% deflation will have people clamoring to save their money instead of investing. Following your logic, prices should just never ever drop.
- Buy crappy Made in China stuff. I personally buy higher quality because it lasts longer. It's far more expensive but lasts a lifetime. For example, you can buy living room furniture for $3000 and it lasts five years, or spend $8000 and it lasts 40 years.
  
  Fact of the matter is that most people can't afford an $8000 furniture set. They may end up paying more for furniture in the long run than someone who can afford that set, but that's just the unfortunate way of things. This well summed up in one of Terry Pratchett's books:
  The reason that the rich were so rich, Vimes reasoned, was because they managed to spend less money. Take boots, for example. ... A man who could afford fifty dollars had a pair of boots that'd still be keeping his feet dry in ten years' time, while a poor man who could only afford cheap boots would have spent a hundred dollars on boots in the same time and would still have wet feet.
  
  Doesn't matter both are made In China.
  
  tells you to do a thing
  immediately calls the thing he just told you to do dumb
Can someone explain why falling prices are bad?
- The article states: “Deflation is bad for the economy because consumers and companies may put off purchases or investments in anticipation of prices falling further. That in turn could further slow the economy, and create a vicious cycle.” China has a robust export business, let’s say you wanted a toaster to buy, you don’t need it you just want it, and this month it’s $12, but you remember seeing it for $15 last month and $21 the month before. So you wait and next month it’s $10. Now since you aren’t in a hurry to get this item why not wait and see how low it goes? Meanwhile Mr toaster salesman’s pulling his hair out because he can’t slash prices to get rid of this inventory fast enough. Or something like that. Now the Chinese government can do several things to go back into the inflation level, one of which is just print money. They also say in the article that they would rather see prices rise naturally and they believe that’s what will happen.
  
  People don't work like that, otherwise sales would be the only time people buy things. The relationship in reality most likely the reverse: people put off purchases for other reasons (i.e. "the economy" isn't as rosy as economists' handpicked numbers claim) and people put off purchases because they can't afford it, so deflation follows.
- Because if it moves too fast everyone holds their money anticipating it'll get even lower, leading to less revenue, leading to belt tightening, leading to people holding their money even more tightly because they lost their income, on and on in a vicious cycle.
  A lot of the economy only exists because of the idea that people are going to buy more than they necessarily need, for a wide range of reasons of enjoyment or personal project or as gifts for family and friends, so if people stop doing that for whatever reason, economy no have good time.
- It means you logically should save instead of spend Very easy death spiral when everyone is saving instead of spending.
- Because business bought too much avocado toast and don't have any savings. Every market fluctuation means they have to adjust overhead. First overhead to adjust is almost always Operation expenses ie labor.
  
  They oughta get a roommate!
- It should be pointed out that the incentive for saving as opposed to spending also applies to businesses and labor, which means they'll slash jobs.
  After all, why continue to pay you when the company can just wait half a year and then hire someone new for significantly less?
- I doubt it's even bad, or at least not as bad as it's made out to be. People have already demonstrated that they aren't going to choose to lower their standard of living today in favor of tomorrow. Technology is already deflationary and people keep buying phones and computers and TV's even though those get better/faster/bigger/cheaper every year.
- Worthless shit is Worthless. China's push for quantity over quality is catching up with it. Maybe the United States auto manufacturers will learn that, but I doubt it. They designed their vehicles to break on purpose.
  
  China just makes what people ask it to. So many places moved all their production to China for cheap labour, and most companies trying to skimp on one thing are also going to skimp on others like materials and quality control. iPhones are also made in China and most people consider them to be high quality. The problem is more just capitalism than China specifically.

48 comments