While the West worries about rising prices, China has the opposite problem. Investors expected the world’s second-largest economy to bounce back quickly after Beijing finally dismantled its zero-Covid policies last year. It’s not happening. Instead, China is on the edge of deflation because of low levels of consumer spending and investment. New figures out this week showed that consumer prices were flat in June compared with a year earlier and fell 0.2 per cent month-on-month, while producer prices, a measure of prices at the factory gates, fell by 5.4 per cent year-on-year in June in the biggest drop since 2016. Compare that with a UK inflation rate of 8.7 per cent – more than four times the Bank of England’s 2 per cent target – while the US inflation rate was at 3 per cent last month, down from highs of 9.1 per cent last June. China releases its latest GDP figures next week. Economists will be watching closely to see how Beijing stops its recovery going off course.
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