China threatened by stagflation

China’s inflation risks are rising while new COVID-19 outbreaks are dimming the outlook for economic growth, Bloomberg reports.


This suggests the country may be facing a combination of high inflation and economic stagnation, referred to as stagflation.

Chinese companies are increasingly shifting their growing raw material costs towards their customers, with factory-gate prices rising to a new high. Vegetable prices in China have surged due to an additional negative factor, bad weather.

China’s economy has slowed down sharply in recent months as the real estate crisis hit many industries, from construction to commodities.

Furthermore, energy shortages have forced factories to cut production, while the stringent coronavirus containment measures have limited consumer spending.

Chinese Premier Li Keqiang said last week the economy was struggling with “new downward pressure,” and policy had to be adjusted to provide targeted support to industries that need it.

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