China's Falling Prices: A Troubling Trend

Consumer prices in China fell 0.3% from the previous year, signaling deflation, which is a more challenging problem for economies than inflation. Deflation can lead to bankruptcies, unemployment, and reduced demand for products and services. During the Great Depression, deflation fueled an economic downward spiral. The cure for deflation is for the government and central banks to inject money into the economy to encourage spending, but it remains uncertain if this approach will work for China due to its high levels of debt.