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Deflation threat haunts Chinese economy as risks from US trade war continues

Beijing, Dec 9 (IECurrentAffairs) The Chinese economy on Sunday faced an economic blow when it reported slower growth in exports and imports. It is said that this economic blow marks the return of deflation threat to China.

According to data released by the National Bureau of Statistics, In November, the consumer price index fell 0.3 per cent from October while the producer price index dropped 0.2 per cent – the first month-on-month fall in seven months – due to the steep fall in the price of crude oil and coal, reported South China Morning Post.

The report also points out that US trade war has also undermined future growth to the Chinese Economy.

Also, a fall in both consumer and producer price indexes was a result of weakness in demand from both Chinese consumers and investors.

On a yearly basis, China’s PPI rose only 2.7 per cent in November, the lowest reading in two years, while China’s CPI in November rose 2.2 per cent from a year earlier, the lowest in four months, the official statistics showed.

Analyst with Haitong Securities,Jiang Chao wrote before the Sunday data that China’s PPI would drop to zero in December and fall further into negative territory in 2019, officially putting China in a deflationary zone.

The return of deflation risks, which often associated with a contraction in economic activities, provides fresh evidence that China’s US$12 trillion economy is heading into trouble, even though China and US have agreed a 90-day truce in the trade war during which they will try to resolve their differences.

The official purchasing managers index, a leading indicator of economic growth, showed activity in China’s vast manufacturing sector stalled in November for the first time in over two years as new orders shrank.

The country’s exports decelerated rapidly last month, although China’s trade surplus with the US widened to a record level, the Chinese customs administration said on Saturday

Source
Via UNI-India
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