Chinese Deflation
– Chinese consumer prices fell 0.3% in the year to July.
– Chinese deflation might have limited impact on global inflation as most of the price of goods made in China and sold elsewhere is paid to workers and other costs in the destination country.
– Weaker Chinese economy could benefit Europe by placing less competition on natural gas supplies.
Foreign Investors Confidence Crisis in China
– Bondholdings of foreign institutional investors fell Rmb37bn in July to Rmb3.24tn, reflecting a lack of confidence in China’s economic measures.
– Challenges to Beijing’s narrative of a robust post-Covid recovery have mounted, with missed payments by companies like Country Garden highlighting Beijing’s reluctance to bail out struggling firms.
– The benchmark CSI 300 index of Shanghai and Shenzhen-listed stocks has almost completely reversed its 5.7% rise following the politburo meeting.
