Economics
China battles against deflation worries
Production-driven recovery leads to trade tensions abroad, yet weak price trends indicate hesitant domestic consumption.
![](https://images.prismic.io/eulerpool/78144ef3-6a2a-47d4-b366-50d96de65a73_Eulerpool-AlleAktien-Chinas-Zentralbank-Greift-Ein-Senkung-des-Reservesatzes-fur-Geschaftsbanken.jpeg?auto=false)
In China, Inflation Recedes Sharply, Raising Renewed Concerns About Potential Deflation as Economy Begins to Feel Benefits of Manufacturing-Led Recovery, Fueling Trade Tensions Abroad
Consumer prices rose only 0.1% in March compared to the previous year, a weaker-than-expected result that highlights the ongoing strains on China's economy from a protracted real estate crisis and restrained consumer spending. Despite the weaknesses, Beijing is increasingly relying on its strength as the world's leading factory. Investments are flowing into manufacturing, particularly in sectors such as electric vehicles and equipment for green energy, boosting industrial production.
As Manufacturing in China Picks Up, Inflation Data Points to an Uneven Recovery. Many Economists Say Officials Need to Do More to Also Boost Consumption. China's Preference for Stimulating the Supply Side of Its Economy is Already Leading to Unrest Abroad. Prices for Goods Leaving Chinese Factories Fell for the 18th Consecutive Month in March, Indicating Growing Capacity That Exceeds Demand.
Weak Inflation in China Contrasts with the USA, where Last Month's Price Increase Exceeded Expectations and Dashed Hopes for Federal Reserve Rate Cuts. US Consumer Prices Rose by 3.5% Year-Over-Year in March. Inflation Weakness in China was Broad in March, with Slowed Price Growth for Services, Food, and Consumer Goods. Core Inflation, Excluding More Volatile Prices Such as Food and Energy, Slowed to 0.6% from a Previous 1.2%.
Economists expect that inflation will recover somewhat, but due to Beijing's preference for boosting supply over consumption, it will remain at a low level. Policy support is intended to bolster growth and prevent the entrenchment of deflation, yet many economists say that more decisive action might be required, perhaps through further interest rate cuts or by stimulating consumption through tax reductions or payouts.