7/10/2023: Deflation in China?

Chinese Economy looks shaky.

I took a week off from blogging last week. I wasn’t exactly on vacation though. My family and I got COVID a week ago in Taiwan and it was brutal. We decided to fly back anyway. The 12 hour flight from Taipei to SFO was exhausting but we made it back to California in one piece. A lot has happened in the past week. Meta launched Threads with a bang with 100 millions signups in the first week. Jobs report for June was out and the unemployment rate remained low at 3.6%. 30-year mortgage rates have skyrocketed to 7.38%. China, on the other hand, is on the verge of deflation as its post-pandemic recovery dramatically slowed.

The China situation is very interesting. Businesses are reluctant to make long term investments and consumers are reluctant to make big ticket purchases like cars or homes. It appears that the strict covid lockdown and the so-called common prosperity policy is contributing to this reluctance. My family’s business in China was asked to contribute to *common prosperity*. The contributions were made but my family are not too enthusiastic about expanding the business in China further due to the unpredictable risks. The troubled property sector also has a reverse wealth effect that is dragging down the economy. In general, there’s not a lot of optimism in China at the moment. If things deteriorate further in China, it will certainly have impact on the global economy and global businesses that rely on Chinese consumers for growth.