China's economic slowdown leads to falling prices domestically and abroad. Chinese exporters, grappling with excess capacity, are slashing prices on goods sold internationally, marking the sharpest decline since the 2008 financial crisis. This phenomenon heralds China's transition from an inflationary force to a potential exporter of deflation, impacting trading partners worldwide. China's consumer prices experienced their steepest annual drop in 15 years in January, plummeting by 0.8%, while the producer price index witnessed a 2.5% year-on-year decrease. Although developed economies may not directly mirror these declines, the ripple effects of Chinese deflation are expected to reverberate significantly in emerging markets, especially those deeply intertwined with Beijing's trading networks.
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42 sats \ 2 replies \ @Undisciplined 11 Feb
This isn't something I've thought much about before. It seems to me like this will mostly help other economies handle deflation.
Homegrown deflation is difficult for businesses because it reduces revenue more than costs. Less expensive imports, on the other hand reduce costs, which should help businesses continue navigating a deflationary environment.
Of course, that also implies a distortion that will favor business that rely on Chinese imports.
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27 sats \ 1 reply \ @TomK OP 11 Feb
and it will further fuel deflationary spirals in other countries possibly through market competition. this puts massive stress on the fiat credit system
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21 sats \ 0 replies \ @Undisciplined 11 Feb
Right. The flip side of my argument is that producers of substitutes for Chinese goods will get a double whammy of homegrown deflation and imported deflation.
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21 sats \ 1 reply \ @OriginalSize 11 Feb
Would be nice to offset inflation though the pessimist in me suspects both can happen on simultaneously different goods.
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0 sats \ 0 replies \ @TomK OP 11 Feb
Yep. We'll see
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