China deflation showing signs of worsening spiral, calls for for immediate policy action

Chief China economist at Morgan Stanley, Robin Xing, says the country is definitely in deflation, probably going through the second stage of deflation.

• “Experience from Japan suggests that the longer deflation drags on, the more stimulus China will eventually need to break the debt-deflation challenge.”

Xing citing falling wages.

Earlier this week the CPI report came in well below estimates, while PPI remained defaltionary:

• ForexLive Asia-Pacific FX news wrap: China’s CPI slows, PPI plunges

A series of investment bank economists and analysts have called for China to splurge around USD1.4tln in the next two years on stimulus efforts.

Good luck with that. China’s stimulus efforts have so far been small and piece meal. Chinese authorities have repeatedly said there will be no more ‘flood like’ stimulus measures.

China prolonged property downturn has prompted households to cut back on spending and increase savings.

This article was written by Eamonn Sheridan at www.forexlive.com.