People’s Republic of China: Selected Issues

IMF Staff Country Reports, August 30, 2024

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People’s Republic of China: Selected Issues

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Bibliographic details

• Published: August 30, 2024
• Series: IMF Staff Country Reports
• DOI: https://doi.org/10.5089/9798400285998.002

Overview

• 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.
• The paper refines the list of deflation risk indicators to better reflect China’s deflation pressures.

Deflation Vulnerability Index (DVI)

• A deflation vulnerability index (DVI) has been developed, which combines data from many factors that may contribute to deflationary pressures.
• Based on the DVI, China is currently experiencing its longest recorded period of downward pressure on inflation.
• The inflation-at-risk analysis identifies the key components of the DVI that affect tail risk of core deflation.

Key findings and statistics

• 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.
• After shocks to the DVI:
  • Probability of deflation could be as large as 27 percent 9 months after a one standard deviation shock to DVI.
  • Probability of deflation could be as large as 54 percent 9 months after a two standard deviation shock to DVI.

Thematic coverage

• Subject areas addressed in the paper include: Balance of payments, Economic sectors, Foreign direct investment, Inflation, Prices, Production, Services sector, Total factor productivity.
• Keywords highlighted: B. deflation vulnerability index, emissions trading system, Foreign direct investment, Global, Inflation, inflation expectation, outward FDI, service sector productivity, Services sector, Total factor productivity.

People’s Republic of China: Selected Issues. August 30, 2024.

Content in this bundle

• People’s Republic of China: Selected Issues; IMF Country Report No. 24/276; July 1, 2024
  • People’s Republic of China: Selected Issues; IMF Country Report No. 24/276; July 1, 2024 (Markdown version)
  • People’s Republic of China: Selected Issues; IMF Country Report No. 24/276; July 1, 2024 (PDF)