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Deflation risk stalking China’s economic recovery

China’s central bank is pushing back with growing regularity on market worries that Asia’s biggest economy may be sliding toward deflation.

In April, China’s consumer price index rose just 0.1% year on year, putting the economy on the edge of negative territory but not yet deep into the problem.

Indeed, China may currently be experiencing “disinflation” rather than a long-term trend toward deflation. Yet if Japan taught policymakers around the globe anything it’s that deflation concerns can quickly take on a life of their own. 

That’s a problem that China must not take lightly, economists say. And it’s high time People’s Bank of China Governor Yi Gang shut down – and firmly – a narrative that Beijing hardly needs as market worries mount about the health of China’s post-Covid economic recovery.

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