It has been six months since Liu Guojun fell in love with a 42-inch Japanese-brand TV at a local appliance store but he plans to wait a little longer before deciding whether to buy.
“I wonder if the price will drop because of the economic crisis,” said the machine shop owner in the eastern Chinese city of Zhengzhou, pointing to the 13,980 yuan (US$2,000) price tag.
“At the moment, it’s still too high, close to the average annual salary here ... I think 5,000 yuan would be a reasonable price,” he said.
Liu and millions of others like him form one of the most important challenges to the Chinese government as it seeks to save the economy from implosion by getting people to buy more.
Deflation is a common feature of a weak economy, and it is particularly devastating because it can be exacerbated by people’s state of mind.
As prices start to drop, consumers decide to put off major purchases, as they figure the products will be cheaper in the future, in turn causing the economy, and prices, to weaken further.
China is not yet experiencing declining prices but the chorus of economists expecting it to happen soon is growing louder.
Last week, the National Bureau of Statistics published data showing that inflation was rapidly approaching zero.
The consumer price index, the main gauge of inflation, grew 1.2 percent last month from a year ago.
It was the lowest in 29 months and marked a continued price softening after inflation hit a 12-year high of 8.7 percent in February last year.
The softening prices came as China’s overall economic growth slowed sharply amid the global economic crisis to 6.8 percent in the final quarter of last year, well off the double-digit pace enjoyed for the previous five years.
“China will sink into deflation this year, no doubt about that,” said Lu Zhengwei (魯政委), a Shanghai-based economist with Industrial Bank (上海興業銀行).
At the frontline of this battle is Wang Yanshuang, who sells washing machines at the Zhengzhou home appliance store.
“I’ve been talking all day long, almost without a break, to every customer who’s stepped in, but I haven’t had much luck,” said the 24-year-old, her hoarse voice testament to hours of futile efforts. “Almost every customer thinks prices will drop further due to the economic crisis.”
Beijing has launched a series of measures to boost consumption, including subsidies for farmers buying electrical appliances and a decision to give away 9.7 billion yuan to the 74 million poorest people.
China’s least well off will get between 100 yuan and 150 yuan each as a Lunar New Year gift.
The government also last week unveiled a plan to invest 850 billion yuan in the healthcare system, in an attempt to address concerns about a poor social safety net that makes many Chinese save rather than spend.
‘SWASTICAR’: Tesla CEO Elon Musk’s close association with Donald Trump has prompted opponents to brand him a ‘Nazi’ and resulted in a dramatic drop in sales Demonstrators descended on Tesla Inc dealerships across the US, and in Europe and Canada on Saturday to protest company chief Elon Musk, who has amassed extraordinary power as a top adviser to US President Donald Trump. Waving signs with messages such as “Musk is stealing our money” and “Reclaim our country,” the protests largely took place peacefully following fiery episodes of vandalism on Tesla vehicles, dealerships and other facilities in recent weeks that US officials have denounced as terrorism. Hundreds rallied on Saturday outside the Tesla dealership in Manhattan. Some blasted Musk, the world’s richest man, while others demanded the shuttering of his
TIGHT-LIPPED: UMC said it had no merger plans at the moment, after Nikkei Asia reported that the firm and GlobalFoundries were considering restarting merger talks United Microelectronics Corp (UMC, 聯電), the world’s No. 4 contract chipmaker, yesterday launched a new US$5 billion 12-inch chip factory in Singapore as part of its latest effort to diversify its manufacturing footprint amid growing geopolitical risks. The new factory, adjacent to UMC’s existing Singapore fab in the Pasir Res Wafer Fab Park, is scheduled to enter volume production next year, utilizing mature 22-nanometer and 28-nanometer process technologies, UMC said in a statement. The company plans to invest US$5 billion during the first phase of the new fab, which would have an installed capacity of 30,000 12-inch wafers per month, it said. The
MULTIFACETED: A task force has analyzed possible scenarios and created responses to assist domestic industries in dealing with US tariffs, the economics minister said The Executive Yuan is tomorrow to announce countermeasures to US President Donald Trump’s planned reciprocal tariffs, although the details of the plan would not be made public until Monday next week, Minister of Economic Affairs J.W. Kuo (郭智輝) said yesterday. The Cabinet established an economic and trade task force in November last year to deal with US trade and tariff related issues, Kuo told reporters outside the legislature in Taipei. The task force has been analyzing and evaluating all kinds of scenarios to identify suitable responses and determine how best to assist domestic industries in managing the effects of Trump’s tariffs, he
Taiwan’s official purchasing managers’ index (PMI) last month rose 0.2 percentage points to 54.2, in a second consecutive month of expansion, thanks to front-loading demand intended to avoid potential US tariff hikes, the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday. While short-term demand appeared robust, uncertainties rose due to US President Donald Trump’s unpredictable trade policy, CIER president Lien Hsien-ming (連賢明) told a news conference in Taipei. Taiwan’s economy this year would be characterized by high-level fluctuations and the volatility would be wilder than most expect, Lien said Demand for electronics, particularly semiconductors, continues to benefit from US technology giants’ effort
RSS