A sharp slowdown in Chinese inflation has prompted warnings that the economy could face the danger of falling prices if the government’s stimulus efforts are too feeble.
China’s consumer price index rose 2.2 per cent in June from a year earlier, down from 3 per cent in May and the lowest in 29 months, data released on Monday showed. The producer price index, which measures the cost of goods when they leave the factory, fell 2.1 per cent, the fourth consecutive monthly decline.
“A full-fledged deflationary cycle has not started yet but you can see it in more and more industrial sectors. That’s a signal that it is spreading,” said Ren Xianfang, an economist with IHS Global Insight. “Once deflation starts, it’s very poisonous.”
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