There seems to be increasing talk of a China experiencing deflation.
Chinese Economics Thread
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Two articles from a popular "rightist", incel, clearinghouse site: Zero Hedge:
The primary source for this one is FT, so...
However, is there even an inkling of accuracy/validity in their economic projections, or any bases in fact to the assertion of governmental pressure to avoid negative forecasting?
Regarding the second, and the observation that currency regime intended to challenge USD/EUR domination will have gold backing, how effective can this strategy be when the US and EU nations currently maintain the lion's share of gold reserves?
It seems, to me, that the deck might, in fact, be stacked against an upstart gold-backed regime. Or, is the intention to achieve a reversal of the British East India Company's Opium trade strategy by requiring payment in gold for the Developing World's commodities that the gold-holding, former Imperialists' and Colonialists', economies cannot function without?
China Bans Negative Economic Commentary, Mentions Of "Deflation"
The primary source for this one is FT, so...
However, is there even an inkling of accuracy/validity in their economic projections, or any bases in fact to the assertion of governmental pressure to avoid negative forecasting?
China Buys 23 Tons Of Gold In 9th Straight Month Of Purchases, Total Rises To Record 2,137 Tons
Regarding the second, and the observation that currency regime intended to challenge USD/EUR domination will have gold backing, how effective can this strategy be when the US and EU nations currently maintain the lion's share of gold reserves?
It seems, to me, that the deck might, in fact, be stacked against an upstart gold-backed regime. Or, is the intention to achieve a reversal of the British East India Company's Opium trade strategy by requiring payment in gold for the Developing World's commodities that the gold-holding, former Imperialists' and Colonialists', economies cannot function without?
In Hong Kong, China - I personally have suffered from deflation.
China's deflation and collapsing economy caused my rent to decrease by HK$1,000 per month. I was forced to have a very tough negotiation with my landlord. In the end, I was compelled to pay HK$1,000 less. It was horrifying.
According to China watchers, deflation is bad because prices decrease. Decreasing prices harm everybody. And as things become cheaper, the poor suffer the most.
I don't wish for any Westerner to experience decreasing prices. Fortunately, it looks like they won't.
China's deflation and collapsing economy caused my rent to decrease by HK$1,000 per month. I was forced to have a very tough negotiation with my landlord. In the end, I was compelled to pay HK$1,000 less. It was horrifying.
According to China watchers, deflation is bad because prices decrease. Decreasing prices harm everybody. And as things become cheaper, the poor suffer the most.
I don't wish for any Westerner to experience decreasing prices. Fortunately, it looks like they won't.
Youth unemployment, demographic crisis, deflation, real estate collapse, local debt, exports collapse, MSM is busy coming up with new coming collapse of China story everyday. It is just this time China is compared with Japan and its persistent deflation issue and lost decades.
Deflation in China is caused by housing prices downturn. Many companies have overproduced and expanded during the pandemic. Another factor is a huge drop in prices for cars due to the EV disruption in the whole industry.
Many mainland Chinese have been paying off their debts and increasing their savings during the pandemic. Economists thought that after the ending of pandemic restrictions most people would start to spend again and savings would decrease. However, that has not been the case. Spending has only increased modestly as people are still busy cutting debts.
Chinese government attempts to stabilize the housing and refinance the mortgage rate for home owners are good starts to alleviate the debt burden for Chinese people and companies. At the moment, deflation caused by falling prices in housing and rent are good for China. As for cars or other items, the market would eventually find a new equilibrium.
In the end of the day, it is the housing that is the biggest drag of Chinese economy. Until housing finds a new footing, the negative pressures on the economy would continue. However, housing bubble needs to pop and reliance on land sales need to end, better deleverage now so people would not be enslaved by working all of their lives to just pay off their mortgage. You never want to build your economy on a pile of rocks and banking. Housing should go back to the traditional role as shelter not speculation for a quick gain.
Many mainland Chinese have been paying off their debts and increasing their savings during the pandemic. Economists thought that after the ending of pandemic restrictions most people would start to spend again and savings would decrease. However, that has not been the case. Spending has only increased modestly as people are still busy cutting debts.
Chinese government attempts to stabilize the housing and refinance the mortgage rate for home owners are good starts to alleviate the debt burden for Chinese people and companies. At the moment, deflation caused by falling prices in housing and rent are good for China. As for cars or other items, the market would eventually find a new equilibrium.
In the end of the day, it is the housing that is the biggest drag of Chinese economy. Until housing finds a new footing, the negative pressures on the economy would continue. However, housing bubble needs to pop and reliance on land sales need to end, better deleverage now so people would not be enslaved by working all of their lives to just pay off their mortgage. You never want to build your economy on a pile of rocks and banking. Housing should go back to the traditional role as shelter not speculation for a quick gain.
The interesting thing is that prices did increase compared to the next month after months of falling.
Like I said MSM doom China bad narrative is usually garbage, with high interest rates all over the world the global economy is cooling so there is less demand for exports from Chinese producers and they just try to sell their inventory locally, is not necessary that demand is gone is that supply has just increased.
The Chinese could devaluate the yuan, cut rates, do stimulus and whatever, the problem is if too much then when inflation comes could come with a vengeance, exponentially, or if they do it at a bad timing when the outside demand recovers and producers start exporting the products rather than selling them local, leading to drying on supply.
Like I said MSM doom China bad narrative is usually garbage, with high interest rates all over the world the global economy is cooling so there is less demand for exports from Chinese producers and they just try to sell their inventory locally, is not necessary that demand is gone is that supply has just increased.
The Chinese could devaluate the yuan, cut rates, do stimulus and whatever, the problem is if too much then when inflation comes could come with a vengeance, exponentially, or if they do it at a bad timing when the outside demand recovers and producers start exporting the products rather than selling them local, leading to drying on supply.
Deflation has a couple big issues beyond the “yay my rent is lower” hype.
It’s bad for entities(people, companies, municipalities, et al) paying off debt because your effectively paying money that’s worth more on a fixed payment amount(all while your income is reduced because all your customers are demanding price cuts because deflation).
it’s also bad for China’s push to increase internal consumption especially on capital goods- i.e. I’ll hold off buying the new BYD/NIO/Tesla/Xpeng EV because they might cut prices in the near future.
It’s bad for entities(people, companies, municipalities, et al) paying off debt because your effectively paying money that’s worth more on a fixed payment amount(all while your income is reduced because all your customers are demanding price cuts because deflation).
it’s also bad for China’s push to increase internal consumption especially on capital goods- i.e. I’ll hold off buying the new BYD/NIO/Tesla/Xpeng EV because they might cut prices in the near future.
Deflation is as bad as inflation but the thing it is more tricky to control. Inflation too high? Raise interest rate, problem solved. Deflation? No economic tool is really effective. Deflation is also coupled with unemployment because firms will cut people off to cut cost. That's why you see massive young unemployment in China. And with more unemployment, it's even harder to prop up demand, lead to more deflation. And the cycle continue.