China’s official consumer price index, a measure of inflation, fell by 0.3% last month from a year earlier, taking the mammoth economy into deflation and triggering concerns about debt, according to the BBC.
Analysts said this increased pressure on the government to revive demand in the world’s second largest economy.
The BBC reports that this follows weak import and export data, which raised questions about the pace of China’s post-pandemic recovery.
The report points out that China is also tackling ballooning local government debt and challenges in the housing market. Youth unemployment, which is at a record high, is also being closely watched as a record 11.58 million university graduates are expected to enter the Chinese job market this year.
Falling prices make it harder for China to lower its debt and address all the challenges which stem from that, such as a slower rate of growth, analysts said.
The BBC quoted Alicia Garcia-Herrero, an adjunct professor at the Hong Kong University of Science and Technology, as saying: ‘It is worrisome as far as it shows that demand in China is poor while the rest of the world is awakening, especially the West.
‘Deflation will not help China. Debt will become more heavy. All of this is not good news.’