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.
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.