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China is drifting toward a deflation trap

Japan offers lessons on importance of not delaying intervention

| China
Apartments under construction in Shenzhen in 2021: With the introduction of a property tax on the horizon, belief that home prices will keep rising appears to have vanished.   © Reuters

Wei Yao is chief Asia-Pacific economist at Societe Generale in Hong Kong. Michelle Lam is greater China economist at the bank.

China is at growing risk of slipping into deflation. To escape a scenario of severe deflation like Japan experienced in the 1990s will require a dramatic reset of the policy mindset in Beijing.

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