Chinese prices continued to fall in January, according to official data released on Thursday, the biggest drop in 14 years, as the government in Beijing tries to revive household consumption, AFP and Reuters reported. , quoted by Agerpres.

This deflation, which the Asian giant is facing, is at the opposite pole to the situation in the world’s major economies, especially in the West, which are struggling with high inflation and a decline in the purchasing power of their citizens.

China’s National Bureau of Statistics (NBS) said on Thursday that its consumer price index fell 0.8% year-on-year in January, the worst drop since 2009, at the height of the global financial crisis. According to the SNB, this decline is explained, in particular, by the “high base of comparison” from the beginning of 2023.

Last year, Chinese New Year, China’s main annual family reunion and a time of heavy consumption, was celebrated in January. This year, the holiday falls on February, which affects the comparison of one year with another.

Deflation began in China in July 2023 for the first time since 2021. After a small recovery in August, prices have been steadily declining since September.

“The main drag on inflation remains food prices, which fell 5.9% year-on-year in January, the lowest level on record,” said Lynn Song, an economist at ING Bank specializing in China. “However, the numbers do not show that China is stuck in a deflationary spiral,” the economist added, noting that the consumer price index rose 0.3% in January compared to December.

Why deflation worries economists

Even if at first glance falling prices appear to be good news for purchasing power, deflation is a threat to the economy as consumers tend to delay purchases in the hope of further falling prices.

Due to the lack of demand, companies, in turn, are forced to cut production and agree to new price cuts to get rid of unsold inventory. This situation, which affects the profitability of companies, forces them to freeze hiring and even resort to layoffs.

Economists speak in this situation about an unfortunate spiral, because this phenomenon is an additional brake on consumption.

For the whole of 2023, inflation in China rose by an average of 0.2%, a far cry from the pace recorded in the world’s major economies such as France, where inflation reached 4.9%.