Analyst Lukyanchikov: Deflation risks threaten to prevent China from achieving 5% GDP growth
New inflation data for China, published by the National Bureau of Statistics, indicate that the measures taken by the state to stimulate the economy are insufficient – if the government does not increase spending on public services and does not raise subsidies for citizens, the country may face deflation, says Freedom Finance Global analyst Roman Lukyanchikov, whose opinion was reviewed by Lenta.ru.
As it became known from the authorities’ report, price growth in China slowed in August to 0.6 percent year-on-year and 0.4 percent month-on-month, and core inflation (excluding food and energy prices) turned out to be the lowest in the last three years and amounted to 0.3 percent compared to the same period in 2023. As the expert notes, investors perceived all this negatively.
According to him, the expected easing of monetary policy by the local regulator in the event of a reduction in the Fed rate may have a short-term positive effect in this area. “However, a more active fiscal policy is needed for a sustainable recovery of demand, and the Chinese authorities have not yet demonstrated any readiness to implement it,” the analyst said, noting that if prices fall, the target for GDP growth by five percent will not be achieved this year.
Bloomberg previously wrote that the Chinese stock market faces increasingly gloomy prospects if the authorities do not step up efforts to restore the economy. According to the agency, there is currently no talk of a quick recovery in consumption, the housing crisis in the country continues, and other growth engines are stalling.
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