Falling prices in China could be a blessing in disguise for the world economy's ongoing fight against inflation
When prices are falling, rather than rising, consumers are likely to hold off on buying things with the hope that they'll become cheaper later on, with that delay dragging down economic growth.
But China's deflation problem could boost the rest of the world economy – with other countries now able to buy cheaper goods from the world's largest exporter, and that potentially filtering through to the average shopping basket. "If the falling price level feeds through into the cost of Chinese exports, then China's most significant export to the rest of the world could become disinflation," Hargreaves Lansdow n's head of equity funds Steve Lansdown said Wednesday.So, deflation in China could give the Fed, the Bank of England, and other monetary policymakers a much-needed helping hand in their war against soaring prices.
Falling prices in the world's second-biggest economy could"give central bankers in the US, UK and Europe pause for thought when they weigh up their next steps," according to AJ Bell investment director Russ Mould. If cheaper goods from China start to pull global inflation down to more manageable levels, there becomes less of a need for central banks to carry on raising interest rates, bringing an earlier-than-expected end to anSo deflation in China might end up being bad news for Beijing – but a blessing in disguise for the rest of the world.
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