Shaun Rein, the founder and managing director of the China Market Research Group (CMR) pinpointed the reason why China’s economy could slip into deflation. Amazingly, it is a decline in pork prices! The expert warns that pork prices could take a nosedive.
Isn’t it incredible that swine pose a threat to the second-largest global economy? The situation is crystal clear when it comes to the uptrend in pork prices. Indeed, pork is one of the crucial ingredients in Chinese cuisine that accounts for its high demand. How come China’s economy could not meet the challenge of falling pork prices? So, let’s check the statistics.
As of November 2023, retail pork prices in China tumbled by 31.8% from a year ago. Shaun Rein is worried that such a dynamic paves the way to deflation in China’s economy.
The analyst reckons that the culprit of a sharp fall in retail prices is the glut of pork in the domestic market. The pork price is a centerpiece in China’s consumer price index. In this context, a plunge in pork prices aggravates high deflationary risks. In the medium term, other Chinese merchandise and services could also be infected by deflation, Shaun Rein thinks.
The expert also detected other precursors to deflation in China: sliding real estate prices and deprecation of basic consumer goods. Still, the collapse in pork prices is setting the tone for the downtrend, Shaun Rein clears up. The above-said factors are extra catalysts of looming deflation, the analyst concludes.
