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China is world's largest exporting powerhouse even after considerable slowdown in its economy and with its exports it is likely to export deflation all around the world. Latest report showed, Chinese economy is closing in on deflationary territory and producer price is now deflating for 43rd months at a stretch.
- Slowdown in food prices pulled China's consumer price index back from a 13-month high, as it grew just 1.6% y/y compared to 2% last month.
- Producer price deflation has been much severe in China, as it is down -5.9% from a year ago in September. China is on its way to almost four years' of producer price deflation. Lower cost of imported commodities as well as overcapacity among domestic producers fuelling price drop.
With price slowing down fast, China is likely to export this deflation around the world, through cheaper products.
People's Bank of China (PBoC) is likely to engage into further monetary stimulus and rate cut to be the most likely approach.
