Can China escape deflation?
By: Zubair Rashid
It’s no secret that China and the US have a unique relationship – two of the biggest economies in the world that rely on each other’s success. The recent surge in inflation rates in the US has many folks concerned as it could impact both countries in a big way. And yes, while this may sound like a problem that only America needs to face, that’s not the case.
High inflation in the US can lead to deflation in China. That means, if prices go up in the US, Chinese goods and services could become too expensive for Americans to afford and demand for them could decrease, leading to decreased production and exportation from China.
Supposedly, there are steps China can take to prevent this from happening. By focusing on diversifying their economy and reducing their reliance on exports, they can weather the storm of American inflation. They can encourage entrepreneurship and innovation, create more job opportunities, and increase domestic consumption by raising income levels and lowering household savings.
And if all else fails, China can implement monetary policies like interest rate cuts and increased borrowing to stimulate consumer spending and boost their economy. The important thing is to maintain a stable exchange rate and avoid currency appreciation to keep demand for Chinese exports strong.
At the end of the day, China’s success does not solely depend on the success of the US. By broadening their overseas market and attracting foreign investments, they can continue to thrive even in the face of turmoil.
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The author is PG in politics & governance from Central University of Kashmir.
