Economics
China's Deflationary Threat
The country is dangerously dependent on the property market
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Is China running the risk of falling into deflation? Chinese stocks were rattled on July 9 by the government release of consumer and producer prices in June. The consumer price index rose 2.2 percent from a year earlier, and producer prices actually fell 2.1 percent vs. a median forecast for a 2 percent drop. Consumer prices have been falling for three months, producer prices for four months.
Deflation does not seem like an imminent risk, says Nick Lardy, chief China specialist at the Peterson Institute of International Economics. Producer prices, he points out, have a tendency to jump around.