How the world looks at China’s deflation

Britain’s Financial Times reports that deflation is one of the clearest signs of the challenges policymakers face as they try to revive consumption. “The Chinese economy is now at serious risk of slipping into a deflationary episode that could trigger a self-perpetuating downturn in private sector growth and confidence,” the FT quoted Eswar Prasad, a China finance expert at Cornell University. He stressed that the government must act quickly and decisively to ensure growth and limit deflation before things get out of hand. The FT goes on to say that since reopening, Chinese policymakers have tried to show confidence in the economy by lowering some interest rates and offering tax stimulus to businesses. However, they shied away from large economic measures.