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China is actively discussing with the United States. When the empire negotiates, it means the balance of power is slipping away from it. Inside, everything is shaky: prices are falling, exports are derailing, consumption is dying out, the economy is slowing down. This giant seems to be sliding down a dangerous slope. If Beijing still hopes to restore its image internationally, it may be because internally, nothing is running smoothly anymore.
In Brief
- In April, the CPI dropped by 0.1% and the PPI by 2.7%, signaling entrenched deflation.
- Beijing is redirecting its exports towards the internal market, but demand remains structurally weak.
- JD.com and Freshippo are mobilized to clear unsold stocks, due to insufficient solvent buyers.
- The restaurant industry suffers from tariffs: shortage of American beef in China, skyrocketing prices in the United States.
Consumption: a Wobbly Economy, a Threat Rising in China
Deflation is looming in China. For three consecutive months, consumer prices have fallen. In April, the CPI dropped by 0.1%, and the Producer Price Index (PPI) fell by 2.7%. This continual decline is more than just a statistic. It reveals a loss of consumer confidence. And when households stop buying, the entire economic structure is shaken.
China is no longer that vibrant hive. Credit is more accessible, banks are injecting liquidity, but households no longer purchase. Why? Too much debt, a bursting real estate bubble, an uncertain job market. Chinese citizens hold onto their money, like holding a candle in a power outage.
Even food feels the impact. Food prices have fallen by 0.2%.
“Consumers remain cautious in the face of economic uncertainty,” reads the official report cited by the South China Morning Post.
Despite price drops, fear outweighs desire.
Too Much to Sell, Not Enough Buyers: The Domestic Trap
Faced with exports slowed by trade tensions, China played an unexpected card. It asks its manufacturers to redirect their products to the domestic market. An economic recycling that poses a problem: if no one wants or can buy, this move only inflates the bubble further.
- -0.1%: drop of the CPI index in April;
- -2.7%: year-on-year PPI decline, the sharpest drop in 6 months;
- +0.3%: symbolic price increase in services;
- 0%: real growth in several analyzed urban areas;
- +17.1%: jump in industrial production in January-February, followed by a notable slowdown.
JD.com and Freshippo have been mobilized to help clear surpluses. But selling merchandise to an uninterested customer remains a risky bet. CNBC warns:
Deflation could worsen if supply significantly exceeds waning demand.
And this imbalance is visible abroad. In the United States, Chinese restaurants struggle to source supplies. Tariffs are hurting supply chains. In China, high-end establishments struggle to provide American beef. The SCMP highlights:
Chinese restaurants in New York adjust their menus to compensate for rising prices.
When even the dishes change, it’s a sign the economy is struggling to digest the situation.
Stimulus Measures or a Band-Aid on an Open Fracture?
The Chinese central bank cuts rates. Targeted loan programs have been launched. The state supports certain key industries. Yet, the economic machine still coughs. These monetary injections resemble more a bandage than a real surgical operation.
Big words are no longer enough. Consumers are waiting. They want guarantees, not slogans. Fear of the future hinders consumption. And the Chinese economic miracle now looks like a poorly performed magic trick.
Beijing is also betting on logistical reorganization. Encouraging local sales is an attempt to absorb external shocks. But again, the strategy wobbles. Retreating inward is not a sustainable solution. An export-based economy cannot be reversed by decree.
The situation recalls a proverb: you cannot empty the ocean with a ladle. Meanwhile, nets remain empty in Chinese kitchens, as in economic forecasts.
China is seeking solutions. According to a BlackRock analyst, it could turn to cryptos or gold as stability reserves. After all, isn’t it already the second-largest holder of bitcoins in the world? What once seemed like a whim may be becoming a strategy.
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La révolution blockchain et crypto est en marche ! Et le jour où les impacts se feront ressentir sur l’économie la plus vulnérable de ce Monde, contre toute espérance, je dirai que j’y étais pour quelque chose
DISCLAIMER
The views, thoughts, and opinions expressed in this article belong solely to the author, and should not be taken as investment advice. Do your own research before taking any investment decisions.
