Deflation and default haunt China’s economy

It can sometimes be difficult to wrap one’s head around the world’s second biggest economy. But three headlines in the space of two days—August 8th and 9th—captured the predicament that China now faces. Exports fell by more than 14% in dollar terms. , one of the country’s biggest property developers, missed two coupon payments on its dollar bonds. And annual consumer-price inflation turned negative. In sum: China’s export boom is long over. Its property slump is not. And, therefore, deflation beckons.Ever since China imposed its first brutally effective in early 2020, its economy has been out of sync with the rest of the world’s. When the country abandoned its ruinous zero-covid controls at the end of last year, many economists hoped that the exceptionalism would continue, and that China would stage a rapid recovery, even as other big economies courted recession. The expectation also raised a fear. Analysts worried that China’s renewed appetite for commodities and other goods would put upward pressure on global inflation, making the lives of central bankers elsewhere even harder. Neither the hopes for growth nor the fears of inflation have been realised.