China Knows That The Grass Isn't Greener On The Other Side

China Knows That The Grass Isn't Greener On The Other Side
Paul Allison, CFA

5 months ago2 mins

What’s going on here?

Data showed that inflation in China is hovering around zero, but you know what they say, the economic situation isn't always brighter on the other side of the fence.

What does this mean?

Countries like the US and UK, weighed down by rising prices and the hefty interest rates designed to tackle them, might look at economies with zero inflation as a modern-day utopia. But China’s in that exact situation, and the country’s hardly thriving. According to the National Bureau of Statistics, Chinese consumer prices were the same this September as they were last year, putting the country on the brink of deflation – potentially a much more threatening foe.

China inflation

Why should I care?

The bigger picture: It’s everyone else’s fault.

Mind you, China might be able to place some of the blame outside its own borders. See, prices in the country’s services sector were actually 1.3% higher than the same time last year, which means it’s the manufacturing sector dropping the ball. And because a lot of that sector’s activity is focused on producing goods to export, weaker demand from abroad is clearly taking a toll. Maybe, then, China’s economy will reap the benefits when inflation-embroiled countries manage to get their ducks in a row.

Chinese exports fall

For markets: Two out of three ain’t bad.

China’s lackluster economy and long-struggling property market have been subject to a lot of scrutiny. But actually, the government’s not too far behind the three targets it set itself back in March. The International Monetary Fund’s projections see the country’s economy nearing its 5% growth target, while official unemployment figures in urban areas are 0.3% ahead of the goal. Only inflation – sitting at 0% despite a 3.3% target – is behind schedule. So despite cries for the Chinese government to firehose more cash into the economy, the country may be more on track than it seems.

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