A China Downturn Could be Lengthy

The downturn in the world’s second largest economy, China, could be the most drawn-out since the 1997-1998 Asian Financial Crisis, said research firm IHS, following a slew of weaker-than-expected economic data for May released over the weekend.

“The macro data for May have confirmed that the economy is stuck in stagnant growth again after a brief rebound. The risk for growth is now predominantly on the down side,” Xianfang Ren, senior economist at IHS, wrote, highlighting that persistent deflation in producer prices and the pullback in fixed asset investment growth are two grave concerns.

“Deflation [producer prices] has lasted for 15 straight months, compared with 12 months during the Global Financial Crisis [in 2008-2009]. That offers a signal that this round of downturn might turn out to be the most drawn-out one since the Asian Financial Crisis which had thrown China into 31 straight months of deflation,” she said.


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