1/ China PPI
China’ PPI (12-month) started to decline from Nov 2021 (Dec 2020 – Nov 2021 when global demand running high and supply running low), and entered the negative territory in Oct 2022 (global demand shock after Fed hiked rates & war in Ukraine)
China’ PPI (12-month) has remained in negative territory for 16 month as of Jan 2024 data. Looks to remain negative for next 6 month at least.
2/ RMB depreciation
Average exchange rate for RMB has depreciated ~9% in 2 years against USD, which caused additional price deflation.
Average exchange rate in 2023: 0.1415 USD.
Average exchange rate in 2021: 0.155 USD.
3/ Domestic demand
Hard to quantify, but weak China domestic demand is partially causing weakness in global demand in commodities etc., especially from the real estate sector., thus reducing inflation pressure.
The sharp dropped happened in August 2021, when Evergrande’s debt problem was catching world’s attention.
