While many central banks around the world are still trying to cool inflation, China is grappling with falling prices.
The Consumer Price Index (CPI) dropped 0.5% in November on an annual basis, the biggest fall since the depths of the pandemic three years ago, according to data released by China’s National Bureau of Statistics on Saturday.
The drop marked an acceleration in the rate of deflation from October, when the CPI fell 0.2% from a year earlier, and prompted calls for urgent action from Beijing to boost demand and prevent a downward spiral of prices.
The data come days after Chinese policymakers vowed to strengthen fiscal and monetary support to boost the world’s second biggest economy, which is struggling with a real-estate crisis, high youth unemployment and subdued consumer confidence.
Can someone explain why falling prices are bad?
The article states: “Deflation is bad for the economy because consumers and companies may put off purchases or investments in anticipation of prices falling further. That in turn could further slow the economy, and create a vicious cycle.” China has a robust export business, let’s say you wanted a toaster to buy, you don’t need it you just want it, and this month it’s $12, but you remember seeing it for $15 last month and $21 the month before. So you wait and next month it’s $10. Now since you aren’t in a hurry to get this item why not wait and see how low it goes? Meanwhile Mr toaster salesman’s pulling his hair out because he can’t slash prices to get rid of this inventory fast enough. Or something like that. Now the Chinese government can do several things to go back into the inflation level, one of which is just print money. They also say in the article that they would rather see prices rise naturally and they believe that’s what will happen.
People don’t work like that, otherwise sales would be the only time people buy things. The relationship in reality most likely the reverse: people put off purchases for other reasons (i.e. “the economy” isn’t as rosy as economists’ handpicked numbers claim) and people put off purchases because they can’t afford it, so deflation follows.
True, but my example aside the economy isn’t an indicator of how a person reacts but how a populous reacts. Following and reacting to trends comes naturally to our brains.
Because if it moves too fast everyone holds their money anticipating it’ll get even lower, leading to less revenue, leading to belt tightening, leading to people holding their money even more tightly because they lost their income, on and on in a vicious cycle.
A lot of the economy only exists because of the idea that people are going to buy more than they necessarily need, for a wide range of reasons of enjoyment or personal project or as gifts for family and friends, so if people stop doing that for whatever reason, economy no have good time.
It means you logically should save instead of spend Very easy death spiral when everyone is saving instead of spending.
Because business bought too much avocado toast and don’t have any savings. Every market fluctuation means they have to adjust overhead. First overhead to adjust is almost always Operation expenses ie labor.
They oughta get a roommate!
It should be pointed out that the incentive for saving as opposed to spending also applies to businesses and labor, which means they’ll slash jobs.
After all, why continue to pay you when the company can just wait half a year and then hire someone new for significantly less?
I doubt it’s even bad, or at least not as bad as it’s made out to be. People have already demonstrated that they aren’t going to choose to lower their standard of living today in favor of tomorrow. Technology is already deflationary and people keep buying phones and computers and TV’s even though those get better/faster/bigger/cheaper every year.
Worthless shit is Worthless. China’s push for quantity over quality is catching up with it. Maybe the United States auto manufacturers will learn that, but I doubt it. They designed their vehicles to break on purpose.
China just makes what people ask it to. So many places moved all their production to China for cheap labour, and most companies trying to skimp on one thing are also going to skimp on others like materials and quality control. iPhones are also made in China and most people consider them to be high quality. The problem is more just capitalism than China specifically.
Well, capitalism definitely has a role, but it’s not exactly a coincidence that China started out with cheap labor (and maintained it so). A country that manipulates its currency for specifically for export reasons is definitely also to blame. (Before you say but US also manipulates currency, the levels of currency manipulation are not comparable: if they were, BRICs would be our world reserve currency)
Anyways, new places don’t go to China for labor, they go for overall manufacturing costs.
All that said, from my (somewhat limited) experience Chinese manufacturing is sort of a niche. If you’re willing to invest all the resources into NRE and QC and not afraid of corporate espionage of your manufactured product, you can definitely save a lot of money (China really isn’t all that good for prototype or small batch manufacturing if you need a made-to-order part/product as the headache from language barrier and quality issues are greater than the cost savings). Apple clearly makes it work because they don’t care if you copy their PCBs - good luck copying their custom-designed ICs.
This is true, China certainly hasn’t helped the situation, although from where they were I can understand them wanting to capitalise on it. I just don’t like it when people blanket say that things made in China are bad. The reputation is obviously there for a reason, but it’s almost just as often western companies that share the blame for general low quality, mass produced, disposable things.
iPhone are garbage as are most Apple products. They have been trailing the industry for over a decade.
I have no love for Apple, I’m just referring to the build quality.
Build quality hasn’t ever been good. Tgr screens have always been terrible.
Understandable, have a nice day.
I hate Apple as it’s an anti-competitive walled-garden monopolistic closed-standard anti-repair evil trillion dollar corporation, but this isn’t true. Modern iPhones have closed the gap significantly in hardware specs (display, processor, optics, IPXX rating, and now thanks to EU even USB-C) and they’ve always been better for general use in software. That, added with the fact that flagship Android manufacturers have learned how to play the pricing games of Apple, means that Apple’s price to performance ratio is pretty competitive with Android phones these days.
Their main products are pretty good these days, as much as I hate to admit it. I’ve never even owned an Apple device, and won’t as long as I can.