China's Deflationary Threat

The country is dangerously dependent on the property market
High-rise residential and commercial buildings stand in Changsha, Hunan Province, China. Photograph BY Nelson Ching/Bloomberg

Is China running the risk of falling into deflation? Chinese stocks were rattled on July 9 by the government release of consumer and producer prices in June. The consumer price index rose 2.2 percent from a year earlier, and producer prices actually fell 2.1 percent vs. a median forecast for a 2 percent drop. Consumer prices have been falling for three months, producer prices for four months.

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