HMM: China is on a mission to spread deflation worldwide.

China is currently experiencing an unusual trend, with negative inflation rates splashed across various price metrics. When consumer prices tumbled in July, the global community raised eyebrows. They did rebound a bit in August, but not enough to alleviate concerns. Food products like pork showcased some of the most drastic fluctuations. However, this decline isn’t isolated to food; sectors such as home appliances and transport are also seeing dwindling prices.

While some areas like tourism are witnessing a price surge, the manufacturing sector paints a grim picture. Prices are dropping across a staggering two-thirds of the primary categories. Even more disconcerting? China’s export prices, which are sagging across an array of products, signaling potential trouble for countries importing Chinese goods.
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China’s dipping export prices might not spell as dire a consequence for global inflation as one might fear. The multiple layers of costs, coupled with profit margins later in the supply chain, restrict the might of China’s deflationary impact. However, dismissing China’s potential to influence global financial health would be nothing short of naive.

Indeed. At the very least since COVID, Xi’s thinking seems to be it doesn’t matter if China isn’t doing very well so long as China’s rivals are doing even worse. Exporting deflation at a time when the U.S. has been busy trying to inflate away crushing federal and personal debt would be a pretty neat trick, so far as Xi is concerned.