Can China escape deflation?
economic reform. Xi Jinping, its leader, is understandably eager to promote “high-quality" growth—innovative, well-paid, green and resilient—rather than “low-quality" growth, such as spending on redundant infrastructure, cheap manufacturing or speculative homebuilding. China’s policymakers know that past stimulus sprees have left behind unoccupied flats and lightly used roads.
Yet reform and stimulus need not conflict. Further public investment in green infrastructure—or flood prevention—would both boost demand and help China adapt to a changing environment. Further easing of China’s hukou restrictions, which were tweaked on August 3rd but still deny some urban public services to migrants from the countryside, would let labour move more freely, and increase consumption.
If policymakers do not do more to dispel deflation, China’s growth, of high or low quality, will be needlessly slow. © 2023, The Economist Newspaper Limited. All rights reserved.
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