The Iran War Brings a Silver Lining for China’s Economy

Beijing won’t shout about it, but the American and Israeli attacks on Iran stand to benefit President Xi Jinping — by helping fend off the specter of deflation. The conflict may do some of the Chinese central bank’s work for it. Once a fairly uncontroversial prediction, interest-rate cuts look less of a sure thing.

Unlike most economies, China didn't see the sharp spurt in inflation that followed reopening from the pandemic. Nor did the People's Bank of China need to boost borrowing costs like the Federal Reserve or European Central Bank; it worried more that demand was languishing. But the spike in energy costs that's followed the assault on Iran, and its retaliation, may give consumer prices the nudge they need to propel them from the danger zone. The PBOC can be more comfortable biding its time.