No 267: Problems in the Chinese Economy

FOR the first time in many decades, China's macroeconomic performance is struggling.

It has had a very hard time time recovering post-Covid due to factors like slow domestic consumption, high youth unemployment and a decline in exports. This lack of growth is leading to the risk of deflation - where prices across the economy fall.

While having prices falling across the economy may seem like a good outcome, it often then leads to consumers postponing purchases in the hope of buying at even lower prices. Firms cannot sell enough, so cut their prices. If consumers still delay purchases, the result can be a "deflationary spiral" where growth falls, firms go out of business, and jobs are lost.

Read about how this is affecting China: https://www.theguardian.com/business/2023/sep/09/chinese-economy-out-of-deflation-but-faces-threat-of-relapse