One of the world's leading economies is facing the threat of uncontrolled devaluation and a significant slowdown in economic growth. One reason for China's current problems has been strict lockdowns during the coronavirus pandemic.
This was stated by the banker, and investor Denis Gorbunenko on his Facebook page.
According to him, the closure of businesses, restrictions on the movement of citizens, and other harsh quarantine measures have resulted in less people spending on goods and services.
“This led to a decrease in production volumes, as enterprises noticed insufficient demand for their products. The decline in international tourism and trade has also affected the Chinese economy, especially industries that depend on exports,” Gorbunenko writes.
He noted that the consequences of the current deflation "may be negative" for the development of the Chinese economy. According to the expert, people and businesses have taken a wait-and-see attitude, counting on a further drop in prices. This causes people to delay purchases and investments.
“This could lead to a ‘delayed demand spiral’ where consumers and businesses postpone spending in anticipation of even lower prices. Such a scenario could further reduce production activity and increase unemployment,” Gorbunenko said.