IMF Staff Country Reports

People’s Republic of China: Selected Issues

August 30, 2024

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International Monetary Fund. Asia and Pacific Dept "People’s Republic of China: Selected Issues", IMF Staff Country Reports 2024, 276 (2024), accessed December 21, 2024, https://doi.org/10.5089/9798400285998.002

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Also available in: 中文

Summary

This Selected Issues paper assesses the downside risks to inflation around the baseline in China. Recent economic shocks in China, including the ongoing property sector adjustment, have resulted in disinflationary pressures and low inflation. A deflation vulnerability index (DVI) has been developed, which combines data from many factors that may contribute to deflationary pressures. This paper refines the list of deflation risk indicators to better reflect China’ deflation pressures. Based on the DVI, China is currently experiencing its longest recorded period of downward pressure on inflation. The inflation-at-risk analysis suggests that output gaps and inflation expectations are the key components of DVI affecting the tail risk of core deflation in China. The probability of deflation in China is currently estimated to be around 7 percent in the baseline but could be as large as 27 (54) percent 9 months after a one (two) standard deviation shock to DVI.

Subject: Balance of payments, Economic sectors, Foreign direct investment, Inflation, Prices, Production, Services sector, Total factor productivity

Keywords: B. deflation vulnerability index, Emissions trading system, Foreign direct investment, Global, Inflation, Inflation expectation, Outward FDI, Service sector productivity, Services sector, Total factor productivity

Publication Details

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