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China's economy is facing challenges, as recently became evident when consumer inflation fell below zero for the first time in over a year. The Chinese Consumer Price Index (CPI) dropped by 0.7 percent in February 2025 compared to the same period the previous year, marking a clear contrast to the previous month’s 0.5 percent increase (Bloomberg News, 2025).
@taskmaster4450le is China really in trouble would you say?
China has a lot of headwinds. They are facing another year of deflation, their third. This is a problem because it results on economic contraction.
Long term, demographics are against them.
Is China facing a Japanese style decline?
Yeah looks like some of the parameters really points to a similar style of decline as Japan.
Demographics tell that story. China could change course but it is going to be hard. I dont say they will die, I dont know.
Their one child policy has done some real damage to their demography and its almost impossible to reverse it in the near future
Yep. It devastated the country's population. Of course, they are not the only one facing this.
We are going to see some interesting economic situation arise out of the demographics.
No many nation face the same issue. Basically just Israel who have high birthrate
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Even core inflation, which excludes volatile items such as food and energy, declined by 0.1 percent—the first drop since 2021 and only the second time in over 15 years. These figures point to persistent deflationary pressure in the country (Bloomberg News, 2025).
A key reason for China’s economic difficulties is its rapidly changing demographics. The country’s population is shrinking and aging quickly, leading to a declining workforce and increased pressure on fiscal policy. According to Darren Tay at BMI Country Risk & Industry Analysis, China’s working-age population will decrease so rapidly over the next decade that it will negatively impact the country’s GDP growth by approximately one percent per year for the next ten years (CNBC Africa, 2024). This demographic shift also creates immediate and severe financial challenges for the government (CNBC Africa, 2024).
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In addition to demographic issues, China faces structural economic challenges. Despite retail sales increasing by four percent in January and February 2025 compared to the previous year and industrial production rising by 5.9 percent during the same period (CNBC, 2025), fundamental weaknesses in the economy persist. These include insufficient domestic demand and operational difficulties for businesses. The Chinese statistics agency notes that the foundation for a sustainable economic recovery remains fragile (CNBC, 2025).
Deflation is particularly problematic because it can trigger a negative spiral where falling prices lead to reduced consumption, lower corporate profits, and higher unemployment (Rauva, 2024). Furthermore, deflation increases the debt burden for both individuals and businesses, as the nominal value of debts remains constant while the value of money rises (Rauva, 2024).
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China’s political leadership under Xi Jinping further complicates the situation. Xi has prioritized stability over bold reforms or dramatic changes despite the growing problems. His strategy has been to endure economic stagnation rather than implement sweeping reforms (Foreign Policy, 2025). At the same time, Xi has attempted to stimulate the economy with limited measures targeting the supply side—measures that have only had short-term effects and led to increased debt and poor investments in the real estate sector (Foreign Policy, 2025).
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The political situation is further aggravated by external threats, such as potentially sharp increases in U.S. tariffs under Donald Trump’s return as U.S. president. These tariffs could severely impact China’s export-dependent economy and threaten millions of jobs in industrial sectors such as electronics and textiles (Foreign Policy, 2025).
China finds itself in a complex economic crisis characterized by deflationary pressure, demographic challenges, and political uncertainty. Without significant structural changes, the country risks falling into prolonged stagnation similar to Japan’s experiences in the 1990s—but potentially even more severe given the scale of China’s problems today.
link to article
https://www.linkedin.com/pulse/deflation-i-kina-svensk-osint-vvpjf/?trackingId=Clj8S2RuTnC2BYxvdk3oYA%3D%3D