China's Tumbling Economy Pushes Exporters to the Brink

Navid

Navid

Feb 4, 2024

Reuters reporting – China’s prolonged factory deflation is causing significant challenges for smaller exporters, leading to relentless price wars and squeezing profit margins. Producer prices have been falling for 15 consecutive months, posing a threat to industrial output and jobs, further compounding China’s existing economic problems, including a property crisis and debt concerns.

Smaller exporters are struggling to maintain their businesses as they face shrinking orders and lower prices, leading to potential job losses. Analysts suggest that addressing deflation should be a higher policy priority than achieving expected growth targets. Policymakers need to stimulate household consumption urgently as sluggish exports require alternative strategies to achieve growth. Many smaller firms are hesitant to take on loans, highlighting a broken link in China’s monetary policy.

The private sector, which provides a significant share of urban jobs, has seen a drop in investment while state investment has risen. The pressure to cut jobs is mounting in the private sector, making it crucial to address deflation and stimulate demand.

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