Deflation at the factory gate reveals serious and fundamental economic distortions.

By Milton Ezrati | The Epoch Times

Summary

China’s latest inflation figures signal more problems for Beijing’s authorities. The latest price figures from Beijing’s National Bureau of Statistics show a worrying lack of consumer inflation, which means consumers are not spending (attributed to a number of factors ranging from the country’s economic slowdown to its property crisis). At the same time, a persistent decline in producer prices (referred to as the ‘factory gate’ by Chinese statisticians) points to an oversupply in the manufacturing sector, which suggests that Chinese factories are producing more goods than the market can absorb, both domestically and internationally.

The Chinese government’s efforts to boost the economy by increasing manufacturing capabilities in high-tech sectors such as electronics, batteries, EVs, and solar cells have not been met with sufficient demand. This misalignment is partly due to trade restrictions imposed by Western countries, particularly the United States and the European Union, which have limited Chinese imports in these sectors

International organizations have advised China to shift towards a domestically driven growth model rather than relying heavily on exports. The emphasis on manufacturing as a substitute for consumer demand has been criticized as a misguided strategy, especially given the changing global trade environment.

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