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Ekonomické zprávy
28.10.2021

Stagflation in China is a ‘very real’ risk in the next couple of quarters - analyst

CNBC reports that Charlene Chu, senior analyst for China macrofinancial at Autonomous Research, said the risk of stagflation is “very real” in China over the next couple of quarters as factory gate prices rise at a quicker pace and an ongoing power crunch hurts economic growth. Stagflation refers to a situation in which the economy simultaneously experiences stagnant activity and accelerating inflation.

In China, the producer price index jumped 10.7% in September compared with a year earlier — the fastest pace since October 1996 when data compilation started. Meanwhile, power cuts across the country prompted several big banks to slash GDP forecasts for China.

Chu said that stimulus could intensify demand for energy and aggravate ongoing power shortages. At the same time, factories having to go offline for several days a week due to the power crunch would continue to hit economic growth, she suggested.

“So because of that, I think we are in a situation where there are a lot of factors weighing on growth right now that are not going away anytime soon and we are probably not getting aggressive Chinese stimulus over the next few months,” said Chu.

“That is going to be a different dynamic for the world to adjust to,” the analyst added, explaining that the world is used to China stimulating its way out of various economic predicaments.

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