China Faces Deflation, But Exporting It Risks Economic Crash
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China is facing deflationary pressures due to COVID lockdowns, real estate woes, and manufacturing declines. This could be exported to the West as cheaper imports.
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Importing some Chinese deflation could help lower Western inflation, while boosting China's growth and consumer prices. It's a potential "win-win."
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This could involve China devaluing its currency to make exports cheaper. Prices of Chinese exports are already falling in dollar terms.
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There is historical precedent of countries like Japan using currency devaluation and trade to export deflation.
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But importing too much deflation risks economic crashes if Western economies also face downturns. The Fed might have to cut rates in response.