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China’s CPI Drop Raises Business Concerns

Amid a summer of dwindling Consumer Price Index (CPI), China confronts growing fears of economic downturn.

This affects not just consumers but also businesses trying to stay afloat.

For instance, Xiu Ying recently cut the price of her Beijing apartment, blaming weaker demand on economic uncertainty.

Previously a pillar of China’s economic growth, the real estate sector now faces a downturn.

Xiu, now 34, wishes she had sold her small apartment when the market was stronger. She now must lower her price as economic conditions worsen.

China's CPI Drop Raises Business Concerns. (Photo Internet reproduction)
China’s CPI Drop Raises Business Concerns. (Photo Internet reproduction)

This trend of declining demand isn’t restricted to real estate. It also hurts small businesses and the wider Chinese economy, a long-time global influencer.

July saw a CPI drop of -0.3%, the first negative change in two years.

Though China’s stats agency denies a downturn, economists warn that soft demand could bring more challenges.

On the production side, things aren’t better. The Producer Price Index (PPI) fell by -3% in August, adding to the gloom.

The discussion about whether China is in an economic downturn continues, but its impact on small businesses is clear.

Drop in Orders

For example, Yúzé Su, who owns a doll factory in a city in Guangdong province, noticed a sudden drop in orders.

His revenue took a big hit, even as COVID-19 restrictions eased and hope for recovery lingered.

Although some consumer spending persists, the bigger economic outlook remains shaky.

Even though post-COVID predictions included moderate inflation, the CPI has averaged just 0.5% this year, much less than pre-pandemic rates.

Factors like lower pig and pork prices, affected by African swine flu, are also impacting the CPI.

Experts believe Beijing must act to boost the economy, especially since achieving this year’s GDP growth target of around 5% is now more difficult.

In summary, fears of an economic downturn loom over China’s real estate sector, businesses, and economy.

The government may have to take bold monetary and fiscal steps to tackle these challenges.

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