You were the first analyst I know of to spot China heading into deflation, so kudos, Peter!
And wasn’t “recovery is just around the corner!” the rallying cry of American politicians in 1933? Ha!
Two questions and a request:
One graph shows three periods of deflation in factory gate prices. Do you have any reliable information (I.e. not Chinese propaganda) to explain how exactly the late-2016 situation got out of deflation? I’m looking for tactics that China might successfully employ again.
Also, if the Hong Kong stock market plunges upon reopening, and stays down, how would you expect that to affect the deflationary trend? Drastically increase the rate of decline?
The request: an interesting column you could write, if you’re interested, would be to contrast Japan’s deflationary periods with China’s. Now, I realize they are much different economies, so it would indeed be comparing apples with oranges. Still, it might give clues of trends to come. After Japan’s CPI had four straight months of decline, what happened in the fifth, and sixth, and one year later? After Japan’s PPC had sixteen straight months of decline, how did it trend afterward?
Actually, I am far from the first analyst to highlight China's economic weaknesses. Pre-covid and pre-Ukrainian war ZeroHedge spent a lot of time highlighting problems in the Middle Kingdom. Post-Covid, however, they have gone more into pro-Russian propaganda which has seriously degraded their estimation as a useful comparison perspective in my eyes.
Corporate media, however, still does not fully believe the "deflation" scenario, even as the facts require them to report it as happening. Everyone wants to believe recovery is just around the corner so that Wall Street and the rest of the world's neo-mercantilists can get back to extracting money and wealth from the lower economic strata worldwide.
As for how China moved out of deflation--keep in mind that the invisible hand is always at work, it just will move in unforeseen ways in response to the visible hand of government intrusions into the economy. Even with government intrusions economies in recession will eventually return to expansion, and deflation will eventually turn to inflation.
The Hong Kong market is not going to stay down. We can be sure of this because Beijing has already deployed its version of a "plunge protection team" to support the markets, and there is no reason to believe they will soon stop.
I'll look into a comparison of China and Japan. Not sure yet if that's the best comparison (China today and the 2008 Great Financial Crisis may be the more apt comparison, depending on what unfolds next).
Not sure if you've seen it but I did do a deep dive on Japan's "Abenomics" experiment. While it doesn't provide a direct comparison to China, I did explore Japan's efforts to break out of the deflationary trap.
Yes, I did read, with considerable interest, your Abenomics column, and I thank you for it. And you’re right, we may yet see an interesting and more appropriate comparison with the 2008 situation (especially if China tries the same economic solutions!). The interesting thing to watch regarding their stock market is, can Beijing make their “plunge protection team” work? I keep thinking that all across China people are calling out, “Abandon ship!”.
Plunge protection teams "work" at most for only the shortest of terms. Pumping money into stocks that are losing value might succeed in halting that decline, but it does nothing to change the underlying fundamentals. And China's economy (and financial markets) are in trouble because of those fundamentals.
Beijing can halt the slide and even generate a market rebound. What it cannot do is prevent market forces from restarting the decline a few months down the road.
This may be of interest to you:
https://www.theepochtimes.com/opinion/why-china-cant-solve-its-problems-of-today-5586693?utm_source=ref_share&utm_campaign=copy
You were the first analyst I know of to spot China heading into deflation, so kudos, Peter!
And wasn’t “recovery is just around the corner!” the rallying cry of American politicians in 1933? Ha!
Two questions and a request:
One graph shows three periods of deflation in factory gate prices. Do you have any reliable information (I.e. not Chinese propaganda) to explain how exactly the late-2016 situation got out of deflation? I’m looking for tactics that China might successfully employ again.
Also, if the Hong Kong stock market plunges upon reopening, and stays down, how would you expect that to affect the deflationary trend? Drastically increase the rate of decline?
The request: an interesting column you could write, if you’re interested, would be to contrast Japan’s deflationary periods with China’s. Now, I realize they are much different economies, so it would indeed be comparing apples with oranges. Still, it might give clues of trends to come. After Japan’s CPI had four straight months of decline, what happened in the fifth, and sixth, and one year later? After Japan’s PPC had sixteen straight months of decline, how did it trend afterward?
Thank you, Peter!
Actually, I am far from the first analyst to highlight China's economic weaknesses. Pre-covid and pre-Ukrainian war ZeroHedge spent a lot of time highlighting problems in the Middle Kingdom. Post-Covid, however, they have gone more into pro-Russian propaganda which has seriously degraded their estimation as a useful comparison perspective in my eyes.
Corporate media, however, still does not fully believe the "deflation" scenario, even as the facts require them to report it as happening. Everyone wants to believe recovery is just around the corner so that Wall Street and the rest of the world's neo-mercantilists can get back to extracting money and wealth from the lower economic strata worldwide.
As for how China moved out of deflation--keep in mind that the invisible hand is always at work, it just will move in unforeseen ways in response to the visible hand of government intrusions into the economy. Even with government intrusions economies in recession will eventually return to expansion, and deflation will eventually turn to inflation.
The Hong Kong market is not going to stay down. We can be sure of this because Beijing has already deployed its version of a "plunge protection team" to support the markets, and there is no reason to believe they will soon stop.
https://www.ft.com/content/99b4a489-c3ae-4b63-b84b-d1ceba717eee
I'll look into a comparison of China and Japan. Not sure yet if that's the best comparison (China today and the 2008 Great Financial Crisis may be the more apt comparison, depending on what unfolds next).
Not sure if you've seen it but I did do a deep dive on Japan's "Abenomics" experiment. While it doesn't provide a direct comparison to China, I did explore Japan's efforts to break out of the deflationary trap.
https://newsletter.allfactsmatter.us/p/japans-abenomics-experiment
Yes, I did read, with considerable interest, your Abenomics column, and I thank you for it. And you’re right, we may yet see an interesting and more appropriate comparison with the 2008 situation (especially if China tries the same economic solutions!). The interesting thing to watch regarding their stock market is, can Beijing make their “plunge protection team” work? I keep thinking that all across China people are calling out, “Abandon ship!”.
Plunge protection teams "work" at most for only the shortest of terms. Pumping money into stocks that are losing value might succeed in halting that decline, but it does nothing to change the underlying fundamentals. And China's economy (and financial markets) are in trouble because of those fundamentals.
Beijing can halt the slide and even generate a market rebound. What it cannot do is prevent market forces from restarting the decline a few months down the road.
Yes, the Invisible Hand!