China urged to take deflation risk more seriously at key meetings

China is holding major political meetings this week, but is not focusing enough on the risk of deflation, according to professor Shang-Jin Wei.

There are already signs of deflationary pressure in China, such as falling consumer prices and declining stock markets over the past year.

Wei points to Japan's experience with deflation as an illustration of the economic risks it poses through reduced business investment and consumer spending.

Wei recommends China adopt both fiscal and monetary policy responses, arguing its current "prudent" monetary policy stance is too timid.

Wei counters common arguments against more monetary easing in China, saying inflation fears are misplaced, additional easing could still be effective, interest rates have room to fall further, and exchange rate stability should not be prioritized over fighting deflation.