Chinese consumer prices fell in July for the first time since the depths of the pandemic, the latest indication that the world’s second-largest economy is weak.
The consumer price index declined 0.3% from a year earlier, official statistics showed Wednesday, the first negative inflation reading since early 2021. That’s not quite deflation, which is usually defined as an extended period of falling prices and is considered detrimental to economic growth.
It is, however, a sign that consumer demand isn’t strengthening enough after the country emerged from lockdowns at the end of last year. Separate statistics Tuesday showed exports fell sharply, another blow to the outlook. That news dragged down global stocks.
There are a couple of things holding China back. One is the difficulty of shifting to a consumption-driven economy from one that has been buoyed by trade for decades. Selling goods overseas is no longer as lucrative as it once was, especially as the technology Cold War heats up with tit-for-tat restrictions on chip sales with the U.S. and others.
President Joe Biden will soon announce bans on private-equity and venture-capital investments in some Chinese technology companies, The Wall Street Journal reported Wednesday.
There’s also problems in the real estate sector, which is deeply in debt. On Tuesday Country Garden, China’s largest developer, missed interest payments on $1 billion of loans, which also shook markets.
China’s government and central bank have so far been reluctant to unleash massive stimulus to combat the slowdown, but it may still continue to come up with some measures. After falling on Tuesday, Hong Kong’s Hang Seng Index closed 0.3% higher on Wednesday.
Write to Brian Swint at [email protected]
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