Part 4/10:
As these issues compound, the reality is that the government’s fiscal and monetary support mechanisms are propping up the supply side rather than addressing the languishing demand. Consequently, this exacerbation of oversupply reinforces the deflationary forces already in play.
The Portents of Economic Stagnation
The specter of a Japan-like balance sheet recession looms large in China’s economic future. The burdens of real debt increase under deflationary conditions, creating challenges for households and businesses alike. Moreover, workers are faced with rising defaults and stress within the banking sector, contributing to a climate of financial instability.