Saturday, September 23, 2023

AXA warns of the impact of China’s deflation on the world economy

Gilles Moec, at the Chief Economist axa investment, manager believes that “it seems that the Asian giant, after its reopening, faced what we considered to be the greatest risk – a return to the pandemic – only to almost immediately return to the wall in old problems – for example, reform Surviving the real estate market.

“Beijing has made it clear that it was building up some stimulus capacity, but so far, Chinese traction has not been as decisive as the rest of the world expected. Overall, we believe the current price development in China deserves further discussion. The extreme weakness of consumer price growth continues when looking at what is to come on the producer price front”, he argues.

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 this should be a tremendous opportunity for China. It is the only major economy now avoiding a global return to inflation by 2020. The resulting gains in competitiveness should support global demand for Chinese products and trigger an export-led recovery,” adding that “the size of China’s export machine and many manufactured goods Given its dominance in the U.S., this will go a long way in reducing inflationary pressures around the world”.

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 impressive legislative arsenal deployed by the US country against products from China did not end there.” In the US has a tangible impact on the amount of Chinese exports.

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 has a cost, which we believe is already becoming tangible.”

World Nation News Desk
World Nation News Desk
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