D.卡尔顿 罗西
D. Carlton Rossi




If millions of Chinese shout about the high price of pork then the Party listens. It imports pork from Canada. It doesn't want dissatisfaction or turmoil during Spring Festival or the largest yearly migration in history. However, if a single Chinese were to whisper the word "deflation" it is heard much more loudly by the Party than a million cries.

The reason is that the Chinese miracle in terms of the growth of the economy was based on inflation. The inflation was fueled by borrowing. However, the current inflation of food prices is another matter. There may have been a cover-up by the government in terms of the swine flu crisis. The effects in terms of food prices may have been exacerbated with the imposition of tariffs by the Americans resulting in artificial inflation of food prices because of both supply and demand.

However, the increase of food prices is only like the tip of the iceberg. There are structural aspects to the Chinese economy which are under great stress. To alleviate that stress to the Chinese economy the government initiated One Belt One Road. That has temporarily masked the underlying weakness of the state-run economy. The main impediment to growth though is increased borrowing costs resulting in debts. It is those debts that must be paid and if not willingly then unwillingly through deflation and deleveraging as in Japan and later as in the United States. The party is over for China.

This situation reminds the author about climate change. At first, it was denied. Then, it was said that man-made activity doesn't influence climate change which is another kind of denial. Today, they say the temperature is cold so how can that be a sign of warming. The Chinese and its government have been the greatest deniers of climate change as they have promoted manufacturing at all costs. Well, the global warming deniers are talking about weather and not climate. Scientists can prove though through facts that the global temperature is increasing. This temperature increase will have dire consequences to the planet.

The Chinese and its government look at increases in the price of food with emphasis on pork. They look at prices over the last year. That is proof of inflation. That is true as far as they can see. However, inflation of food prices is only an indicator of part of the economy. The rise in apartment prices is slowing in many Chinese cities. It is apparent that the real GNP is not only slowing but is not as high as has been reported in official statistics. The Hong Kong economy is in recession. Those are all nascent signs of deflation rather than inflation. It is time to pay the piper as the party is over. The slowing of the Chinese economy is the best news to reduce greenhouse gases. It deflates the hot air balloon of global warming.

D.卡尔顿 罗西

D. Carlton Rossi


Price Deflation in Asia

Murray Gunn

July 15, 2019

Whilst declining producer prices, or "factory-gate deflation" as it is sometimes called, can be a sign of a slowing economy, it doesn't have to be. The chart below shows that Chinese and Japanese producer prices have experienced a number of periods of producer price deflation over the past 22 years. During the Chinese producer price deflation of 2001 to 2002 for instance, Chinese GDP growth was accelerating. In fact, one could argue, as Philipp Bagus does in his book "In Defense of Deflation," that it should be natural for prices to fall in a growing economy. In simple terms, more stuff is being produced relative to demand and that should lead to downward pressure on prices. In reality, producer prices in particular are at the mercy of fluctuations in global commodity markets such as oil.



China’s Industrial Profit Widens Drop on Economy, Deflation

Bloomberg News

October 26, 2019

Profits at Chinese industrial enterprises continued to contract as the economy slows and factory deflation deepens.

Industrial profits dropped 5.3% in September, according to the National Bureau of Statistics on Sunday.

While industrial production picked up in September, growing deflationary pressure continued to weigh on corporate profits and their debt servicing ability. Companies’ earning power will likely remain depressed in the coming month amid weak demand.

“The larger slide in September was due to a faster decline in industrial product prices and a slower growth in sales,” the bureau said in a statement released with the data.



China's Factory Deflation Worsens

Bob Stokes

October 15, 2019

Premiere Li Keqiang of China said his nation's economy is facing downward pressure and difficulties, according to China Central Television (Oct. 14).

This chart shows the year-over-year change in Chinese Industrial Production. The August figure declined to 4.4%, which is below the extreme during the prior bear market. The last time there was a lower reading was in March 2002, more than 17 years ago.


China “Faces The Worst Of Both Worlds” As PPI Deflation Arrives While Food Inflation Soars

August 9, 2019

However, it was the first drop in the PPI since 2016 that spooked traders, and first sent Chinese bond yields lower, and shortly thereafter, the Shanghai Composite, amid renewed fears that China is facing a hard landing, and who knows – maybe well before the 2020 US presidential election: “That underscores that rates traders are much more worried about the economy’s downturn than rising CPI.”

Indeed, as Evans-Pritchard ever so diplomatically put it, with accelerating consumer prices and the return of factory-gate deflation, “the upshot is that China faces the worse of both worlds.”