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China Is Oversupplied With Commodities as Deflation Persists
- Last year’s import binge included record hauls of coal and oil
- Metals traders eye Beijing’s fiscal response to economic woes
By Bloomberg News
February 8, 2024 at 10:12 AM GMT+8
Updated on
February 8, 2024 at 10:57 AM GMT+8
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China’s commodities markets are heading into the Lunar New Year break on a glum note, with deflation embedded on both the consumer and producer sides of the economy.
Agricultural goods were at the forefront of the steepest decline in consumer prices since 2009, according to Bloomberg Economics, after the fall in food costs widened to 5.9% year-on-year in January from a 3.7% drop in December. The outlook for pork, which has a heavy weighting in the basket of goods measured, is particularly gloomy. Grain markets face similar issues around oversupply after last year’s binge on imports.
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Seeing red.
Photographer: Paul Yeung/Bloomberg
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The shock ouster of China’s top securities regulator on Wednesday was no doubt meant to signal that Communist Party leaders are serious about halting a $5 trillion selloff in local stock markets. The same could be said of recent curbs on short-selling and coordinated buying by China’s “national team” of state funds.
In other ways, though, Chinese leaders appear to be dealing with the slump by sticking their heads in the sand. The strategy is, to say the least, unlikely to work.
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Markets
Quicktake
What China’s Persistent Deflation Means for the World
Customers shop vegetables at a market in Shenzhen, China.
Photographer: Qilai Shen/Bloomberg
By Bloomberg News
February 8, 2024 at 9:23 PM GMT+8
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China’s slide into deflation is proving hard to fix. Prices in the world’s second-biggest economy have fallen for three consecutive quarters, the longest deflationary streak since the Asian Financial Crisis in the late 1990s. The trend appears set to continue, adding to the challenge for policymakers as they try to kick-start the country’s growth engine and defuse a simmering debt crisis.
The term describes a situation in which prices for goods and services fall across the economy. It’s not to be confused with disinflation, which signifies prices are still rising, though more slowly. That’s what’s happening in the US.
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