China's deflation returns

China's consumer prices dropped 0.2% in October, signaling a return to deflation due to weak domestic demand.

Falling pork prices

The decline is being attributed to falling pork prices, China's most-consumed meat, and a heavyweight in the country's consumer price index (CPI).

Low demand challenges

China's weak CPI and PPI readings indicate persistently low demand, posing challenges for policymakers.

Investor confidence threatened

Deflation can undermine investor confidence and negatively impact consumption in the highly leveraged economy.

Stimulus measures needed

The low inflation rate has led economists to argue that China's economy is not reaching its full potential and requires additional monetary and fiscal stimulus.

China's action

In response, Beijing has implemented measures such as lowering interest rates, decreasing the amount of cash banks must hold in reserve, and issuing more sovereign bonds.