China’s economy teetered on the brink of deflation in June, which needs prompt stimulus package to be launched by Beijing to sustain the country’s sputtering post-Covid recovery.
The consumer price index was flat year on year and declined 0.2 per cent compared with the previous month, while the producer’s prices witnessed a sharp fall in their prices in seven years as demand for both consumer and manufactured products softened.
It is expected by the analysts that the China’s central bank, the People’s Bank of China, to reduce interest rates again adding to a round of cuts last months that many believe Beijing will have to supplement with fiscal stimulus policies.
China is targeting growth of 5 per cent in its gross domestic product this year as the economy crawls its way out of the draconian COVID-19 controls, but the recovery is proving fragile, as the property prices and exports are falling.
“China is still growing – the question is whether it will hit its target,” stated Heron Lim, economist at Moody’s Analytics. He added that the economy is indeed recovering but the concern is that it’s “slowing down.”