Home BusinessEconomic News China’s Economy Is Set to Avoid a Japanese-Style Deflation

China’s Economy Is Set to Avoid a Japanese-Style Deflation

by Stella Morgan

China’s economy is showing signs of recovery, with prices on the rise and fears of deflation easing, according to an independent survey by data company World Economics. The all-sector price index reached a 14-month high of 50.9 in September, indicating a resurgence in the world’s second-largest economy. This news contradicts concerns that China was entering into a deflationary period similar to Japan’s long-standing economic slump.

China’s economic recovery has been slow since April as trade tensions persist and a property crisis weighs on demand, construction, and overall confidence. This slowdown sparked worries that the country was heading towards a “balance sheet recession,” characterized by households and businesses paying off debt instead of investing or spending, resulting in deflation and economic stagnation. However, the recent survey by World Economics suggests a positive turnaround.

The survey’s findings align with other early signs of improvement in China’s economy. Official data from the Chinese government revealed that the economy picked up in August due to a surge in summer travel and a larger stimulus package. Factory production and retail sales growth exceeded expectations, and credit demand also improved. However, the property sector continues to struggle, presenting a challenge for further recovery.

The survey further indicates that the services sector is the driving force behind the rebound, with the price gauge rising to 53.2 in September. On the other hand, the measure for manufacturers remained below the 50 level, which indicates contraction, but the index reached an eight-month high of 49. This suggests a potential recovery in the manufacturing sector as well.

Additionally, the all-sector sales growth index increased to 53.1, primarily driven by the expansion in the services sector, which reached a five-month high. However, the manufacturing industry’s performance was relatively stagnant, according to the survey.

While these positive signs hint at a potential recovery, challenges still lie ahead, particularly in the property sector. The Chinese government will need to address these issues to ensure a sustained economic turnaround.

Overall, this independent survey by World Economics provides renewed hope for China’s economic growth. The rising prices and positive indicators from various sectors suggest that the worst may indeed be over for the world’s second-largest economy. However, further efforts are needed to address existing challenges and ensure a complete and lasting recovery.

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