China’s economy faces deflation: companies cut staff and investments
China’s economy is caught in a «vicious circle» due to deflation, writes Wall Street Journal. staff, but this does not solve the problem.
Once expectations of low prices take root among the population, these sentiments are difficult to change, the WSJ draws attention and cites Japan as an example: in the 1900s, the bursting of bubbles in the real estate market and the stock market have forced the Japanese and Japanese companies to pay off debt rather than invest and spend, even as interest rates have dropped to near zero. This led to nearly three decades of weak economic growth and persistent deflation.
