Saturday, September 23, 2023

AXA IM: Can the world survive Chinese deflation?

Gilles Moeck, chief economist at AXA Investment Managers, analyzed the development of the Chinese economy and its global impact: “It seems that the Asian giant, following its reopening, is avoiding the biggest risk we face – a rebound pandemic – only almost immediately relapsing into old problems – for example, the housing market reform.” Beijing has made it clear it was building up some stimulus capacity, says expert, but so far, Chinese traction lags rest of world has not been as conclusive as expected. Overall, we believe the current price development in China deserves further discussion. The extreme weakness in consumer price growth continues when looking at what is to come on the producer price front.”

Moëc points out that “inflation is near zero, which is another sign that the Chinese economy continues to perform below potential. But under normal circumstances, it Should be a tremendous opportunity for China, It is the only major economy that has so far escaped a global return to inflation. The resulting gains in competitiveness should support global demand. of Chinese products and spur an export-led recovery” and adds that, “Given the size of the Chinese export machine and its dominance in many manufactured goods, It will make a powerful contribution to contain world inflationary pressures,

According to Moëc, “Chinese exports have reopened, but this may clash with the general diversification of Chinese supplies led by the US. It would be surprising if the US country deployed an impressive legislative arsenal against products from China There is no tangible effect on the volume of Chinese exports to the US.

In short, the expert believes that “the current gap between the deflationary forces operating in China and the inflationary wave in the developed world should be resolved, at least partially, with greater demand for Chinese products. However , politics gets in the way. Of course, the pursuit of economic sovereignty is understandable, but it comes at a costwhich we believe is already becoming tangible”.

World Nation News Desk
World Nation News Desk
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