China's deflationary spiral is now entering dangerous new stage (Bloomberg)

[Commissar SFLUFAN]

China’s Deflationary Spiral Is Now Entering Dangerous New Stage

FINANCE.YAHOO.COM

---

(Bloomberg) -- Deflation stalking China since last year is now showing signs of spiraling, threatening to worsen the outlook for the world’s second-largest economy and raising calls for immediate policy action.Most Read from BloombergHow Americans Voted Their Way Into a Housing CrisisWorld's Second Tallest Tower Spurs Debate About Who Needs ItThe Plan for the World’s Most Ambitious Skyscraper RenovationUC Berkeley Gives Transfer Students a...

 

Quote

 

Deflation stalking China since last year is now showing signs of spiraling, threatening to worsen the outlook for the world’s second-largest economy and raising calls for immediate policy action.

 

Data released Monday confirmed that apart from food costs, consumer price growth barely registered in large swathes of the economy at a time when incomes are sagging.

 

A broader measure of economy-wide prices known as the gross domestic product deflator will likely extend its current five-quarter drop into 2025, according to Bloomberg Economics and analysts at banks including BNP Paribas SA. That would amount to China’s longest streak of deflation since data began in 1993.

 

“We are definitely in deflation and probably going through the second stage of deflation,” said Robin Xing, chief China economist at Morgan Stanley, citing evidence from wage decreases. “Experience from Japan suggests that the longer deflation drags on, the more stimulus China will eventually need to break the debt-deflation challenge.”

 

The danger for China is deflation could snowball by encouraging households reeling from falling paychecks to cut back on spending, or delay purchases because they expect prices to fall further. Corporate revenues will suffer, stifling investment and leading to further salary cuts and layoffs, bankrupting families and firms.

 

Private surveys show that’s already starting to happen. In sectors of the economy favored by the government — such as electric vehicle-manufacturing and renewables — entry-level salaries declined by almost 10% in August from a peak in 2022, according to findings by Caixin Insight Group and Business Big Data Co.

 

A survey of 300 company executives by the Cheung Kong Graduate School of Business showed growth in labor costs last month was the weakest since April 2020, when China’s initial Covid lockdowns began to ease.

 

It’s a cycle the world has seen before in Japan starting in the 1990s during a period that came to be known as its “lost decades” — when a grinding stagnation followed a burst bubble in real estate and financial markets.

 

 

[Vitalsign]

Time to buy Puts on FXI

[Spawn_of_Apathy]

Maybe China should have thought about a minimum wage. 

[CitizenVectron]

What's that fake quote from Bismark? God has a special providence for fools, drunkards, and the United States of America. It seems every time the US is going to face a major challenge (running out of oil, the rise of China, etc) something comes in to save the day.

 

However, while this will possibly help the US maintain its economic leadership into the mid-21st-Century, it's also bad news for internal stability in a nuclear nation that is itching to take back some of its lost territory (that the US has promised to defend). So not good.

 

 

[Kal-El814]

They can't afford to NOT invade Taiwan!

[Greatoneshere]

Don't see how starting a potentially costly war with America through Taiwan helps your deflationary spiral until you win, and there's no guarantee of that, and it would just be a band aid on the population problem they're going to have anyway.

[Fizzzzle]

One thing we've seen in Russia and Israel are two instances where war only made sense to those in power. They know it will alienate them on the global stage, they know ultimately they can't win, but going to war keeps them in power for another day.

 

The more China's economy goes down, the MORE likely it is that they'll invade Taiwan, because the world has forgotten that the Chinese people are pretty damn good at revolutions. If the CCP starts to see their power slip, they very well might start WW3 just to remain in power for another day. Even if Pooh knows he can't ultimately win.

[Greatoneshere]

1 hour ago, Fizzzzle said:

One thing we've seen in Russia and Israel are two instances where war only made sense to those in power. They know it will alienate them on the global stage, they know ultimately they can't win, but going to war keeps them in power for another day.

 

The more China's economy goes down, the MORE likely it is that they'll invade Taiwan, because the world has forgotten that the Chinese people are pretty damn good at revolutions. If the CCP starts to see their power slip, they very well might start WW3 just to remain in power for another day. Even if Pooh knows he can't ultimately win.

 

I mean, governments are stupid, it's highly likely they'd do it, I just don't see it helping their issues like this one.

[Fizzzzle]

1 hour ago, Greatoneshere said:

 

I mean, governments are stupid, it's highly likely they'd do it, I just don't see it helping their issues like this one.

I mean, "we're about to be ousted by our own people, let's start a war" is a very old trick in the playbook. It never actually works, but that doesn't keep people from doing it. Shit, that's what caused Argentina to pick a war with Britain.

[legend]

15 minutes ago, Fizzzzle said:

I mean, "we're about to be ousted by our own people, let's start a war" is a very old trick in the playbook. It never actually works, but that doesn't keep people from doing it. Shit, that's what caused Argentina to pick a war with Britain.

 

[Fizzzzle]

Look up the Pig War. It's actually kind of funny in retrospect because no one died. Well, except the pig.

 

It was a conflict in 1859 between the US and Britain over the San Juan Islands. A few rogue generals in the US army actually wanted to pick a fight with Britain over something - anything - because they thought starting a war with Britain would cause an end to the brewing tensions leading up to the Civil War. George Pickett, a traitor of later Gettysburg fame was one of the primary agitators.