China's economy risks heading into recession as Producer Prices enter deflation, reports say
China's economy risks heading into recession as Producer Prices enter deflation, reports say
China's economy has been the growth engine for the global economy since 2008's financial crisis. But now it seems possible it could enter recession
cross-posted from: https://feddit.org/post/3202701
China’s problem is essentially that it has too much debt.
The main role of debt is to bring forward demand from the future. [...] China’s stimulus has kept on increasing since 2008, until it peaked with the end of the pandemic.
Now China risks entering a classic ‘debt trap’ where new loans are taken out to repay existing debt – not to create new demand. In other words, the debt is no longer being used to generate growth. In turn, this risks generating a downward spiral.
[...]
The underlying problem, of course, is China’s massive housing bubble. It was probably the largest ever seen. And it has been bursting for some time, with home sales slumping, as the Bloomberg chart shows.
[...]
China needs to urgently boost [domestic] consumption and downsize manufacturing.
[...]
- Housing is currently unaffordable for most people
- The real estate market is an outsize risk for the economy – it is 29% of GDP, and 70% of China’s urban wealth
- Given China’s ageing population, it seems likely [that housing sales] volume could drop at least another 20% before the market bottoms
- That will mean China will need to import a lot less oil, metals, plastics and everything else connected to the bubble.
A quick reminder that those with a lot of money in non-cash assets want you to believe that deflation is a bad thing.
If you get paid in cash? Deflation is good for you. Deflation means your $ will have more buying power.
Yes, jobs will be cut, but that is always temporary because all companies need to generate revenue. If they generate revenue through employees they can't axe them and grow.
Why would job cuts be temporary if demand stays low?
Modern inflation has nothing to do with supply/demand.
We exist in a supply side economy, meaning that demand is always less than available supply. Yet inflation is a real problem. Current inflation is largely do to a variety of middle men getting entire pieces of transactions - credit card fees, payment for order flow market making, insurance, etc.
Any business that relies on production will not see existing demand change. McDonald's for instance does not make it's money off selling food - they make money off of real estate and licensing. You'll see McDonald's jobs disappear, but the demand for cheap fast food will still exist. Local diners will pop up to take their place.
It was an amazing feeling when I was able to budget properly finally and start being able to proactively buy what I wanted or needed coming from a place of security and being able to shop around and use Costco etc.
Its straight up evil what is being done in terms of inflation. Treadmill of death
Babe, it's time for your news story about "China will fall anyday now"
yes dear
The system being set up where the only way prices broadly go down is if the economy is bad has always bothered me.
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