China Deflation: Alarm bells for China! Inflation declined fastest in three years, country struggling with 'deflation'

China Deflation: Alarm bells for China!  Inflation declined fastest in three years, country struggling with 'deflation'

Deflation in China: China, the world's second largest economy, has been going through a bad phase for a long time and now there has been news of another concern regarding it. Deflation is increasing rapidly in the country. According to a Reuters report, consumer prices in China have seen the sharpest decline in three years in November 2023 and the consumer inflation rate (CPI) rate has fallen by 0.5 percent compared to November 2022 and October 2023.

What is the reason behind deflation in China?

According to the data released by the National Bureau of Statistics (NBS), a situation of deflation has arisen in China. There are many reasons behind this, but weak domestic demand has slowed down the economic recovery and also reduced inflation in the country. The continuous decline in CPI is taking the country towards deflation.

Deflation recorded higher than expected

According to the poll of news agency Reuters, the inflation rate in November 2023 was estimated to be 0.1 percent less on annual and monthly basis, but the actual figures have come out to be more shocking. The inflation rate in the country has decreased by 0.5 percent on both monthly and annual basis. On the situation of deflation in China, experts have said that these figures are worrying.

The decline in crude oil prices in the global market, less travel by people in winter and problems in the supply chain have been held responsible for this. In China, the inflation rate of energy and staple food items in November 2023 has been 0.6 percent. At the same time, the country's Producer Price Index (PPI) has seen a decline for the 14th consecutive month and it has reached 3 percent. Whereas experts had expected PPI to be 2.8 percent.

What is 'Deflation'?

A decline in inflation in a country is called 'deflation' or 'deflation'. Due to this, everything from food to energy becomes cheaper in the country, but this is not good for the economy. This has a negative impact on the profits of businesses and companies. The main reason behind deflation is that there is more supply and less demand in the market. Differences in the supply chain lead to deflation. 

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