What's behind the China deflation scare

The Indicator from Planet Money

NPR

Business

4.7 • 9.2K Ratings

🗓️ 12 July 2023

⏱️ 9 minutes

🔗️ Recording | iTunes | RSS

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Summary

Earlier this week, China reported a headline CPI of zero. Observers are concerned about the potential for a deflationary environment in China that could have ripple effects for the rest of the world. Today, we find out why prices are falling in China and what the CCP could do to reverse that trend.

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Transcript

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0:00.0	NPR.
0:12.2	This is the indicator from Planet Money.
0:13.8	I'm Patty Hirsch.
0:15.1	And I'm Whalen Wong.
0:16.4	We got some good news on inflation today.
0:18.8	It continues to fall.
0:20.7	The Consumer Price Index show that in the 12 months through June, inflation has increased
0:25.7	3%.
0:26.7	That's down from 4% last month.
0:29.0	3% not bad, better than 8.7% in the UK for sure, and 6.1% in the Eurozone, but not as
0:35.5	good as China, which registered a headline CPI of zero this week.
0:39.7	Zero.
0:40.7	Ah, yes, prices there are generally falling, unlike here.
0:44.7	For example, vehicle prices, which rose 4% year on year in the US, are dying 4.3% in
0:50.3	China.
0:51.3	Meat prices.
0:52.3	Here they're still rising up 0.6%.
0:53.3	But in China, pork, which is the most popular meat, is dying 7.2%.
0:58.8	And this is not necessarily a good thing for China.
1:02.1	Prices are falling so far and fast there right now that some observers are worrying that
1:06.5	China could slip into deflation.
1:09.0	That's the vicious cycle of plunging prices for goods and services that can paralyze an
	...

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