China’s mainland is facing weak domestic demand, forcing officials to confront the pressure of deflation. Earlier this month, former governor of the People’s Bank of China, Yi Gang, publicly warned about deflationary pressures, followed by a surge of videos explaining deflation knowledge on Chinese social media. Some netizens speculate that the authorities may already have “measures to deal with deflation,” but experts are not optimistic.
The three-day Mid-Autumn Festival holiday in mainland China ended on September 17, and for many transportation and tourism businesses in China, this year’s Mid-Autumn Festival did not bring the expected commercial opportunities.
According to data cited by the Ministry of Culture and Tourism of the People’s Republic of China on September 10, the average one-way airfare including taxes within China during the Mid-Autumn Festival holiday was 770 yuan, a quarter lower than the prices during last year’s Mid-Autumn Festival and the three days leading up to the National Day holiday.
Statistics from the “Qunar Big Data” platform also show that during the Mid-Autumn Festival holiday, among the top 100 hotels, thirty percent had room rates equivalent to off-peak season rates, indicating no room for price increases. Even the iconic mooncake sales saw a significant decline.
Discussions on the “unsold mooncakes” this year have repeatedly trended on social media. Market analysts have described this year’s Mid-Autumn Festival as the “coldest Mid-Autumn” ever.
Data from “Immediate Win,” a Chinese consumer offline retail monitoring agency, shows that on the eve of this year’s Mid-Autumn Festival, sales of mooncake products in major stores almost halved, dropping by 45% compared to last year and marking the second consecutive year of decline.
In some supermarkets in mainland China, the prices of most branded gift box mooncakes range from 100 yuan to 300 yuan, with 4 to 8 pieces per box. This year, there is a noticeable increase in mooncakes priced below 100 yuan, making it even more challenging to sell high-priced mooncakes.
Analysts from Huatai Securities quoted by “Wall Street News” report that due to weak domestic demand and high inventory, during the holiday season, the prices of the “Mid-Autumn Quartet”: red wine, mooncakes, tea leaves, and hairy crabs have all increased in quantity but decreased in market price by over 10% year-on-year.
The sentiment of internet users in Hangzhou, such as “Mr. Zhang’s trumpet,” is quite representative: “Nowadays, even ordinary people can’t afford mooncakes.”
The sluggish economic recovery in China and the lower-than-expected consumption during the Mid-Autumn holiday once again confirm the severe economic challenges faced by China.
At the Shanghai Bund Financial Summit on September 6, former governor of the People’s Bank of China, Yi Gang, stated that China should now “focus on resisting deflationary pressures” and needs to adopt active fiscal policies and prudent monetary policies to stimulate economic growth.
With weak domestic demand and escalating deflationary pressures, this sensitive topic has always been avoided by officials. Yi Gang’s remarks are seen as bringing China’s deflation problem “to the forefront.” Recently, platforms such as Douyin and Xiaohongshu have started to feature a large number of videos explaining deflation knowledge.
Douyin recently released short videos titled “Experts teach you how to deal with deflation,” in which Guan Qingyou, director of the China Institute of Finance, advises the Chinese people to “try not to lose your job, find a job as much as possible after losing it, spend as little money as possible,” and “don’t treat the dividends of the times as your own abilities.”
Search records recommended by Douyin also indicate that keywords like “China (Communist Party) acknowledges deflation,” “best methods for people to resist deflation,” and “consequences of deflation” have garnered high attention from netizens.
Many Douyin bloggers, including “Guyu Family Office,” have speculated that the authorities may have opened up and relaxed internet censorship to allow scholars and the public to begin addressing deflation directly, indicating that “the measures to deal with deflation are likely already in the works.”
However, several analysts told Voice of America that they are not optimistic.
Wang Guochen, a research assistant at the First Research Institute of the Chung-Hua Economic Research Institute in Taipei, said that as early as two to three years ago, when China’s money supply was growing in double digits but prices were not rising accordingly, concerns about China’s deflation risk had already arisen. Over the past year, China’s Consumer Price Index (CPI) has remained below 1% year-on-year each month, clearly indicating that China is indeed shrouded in a deflationary cloud.
Although major commodities like housing and cars have seen price reductions in China, consumer goods have shown price increases since July, including popular items humorously referred to as the “poor man’s three-piece set” like cola, instant noodles, and pickled vegetables.
Wang Guochen explained that the prices of basic consumer goods rising instead of falling indicate a phenomenon known as “stagflation” in China, which is the most pressing issue affecting the grassroots people.
He stated that one of the reasons for this is due to many people “downgrading their consumption” and purchasing cheaper goods, leading to an increase in prices due to rising market demand. Additionally, local governments have raised various fines and public service fees to increase revenue, indirectly raising the costs of goods manufacturing and transportation, which is then passed on to consumers by companies.
Besides fines, a substantial portion of the price increases comes from the rising prices of public facilities, like water and electricity, public transportation, which may be the reasons driving the overall price increases. Another factor is that because people cannot afford to dine in high-end restaurants, they choose to consume low-end essential goods, causing prices to increase,” Wang Guochen elaborated.
Sun Mingde, Director of the Economic Forecasting Center at the Taiwan Institute of Economic Research in Taipei, believes that China’s most serious economic problem stems from the sluggish real estate market, which accounts for 30% of the economy.
He analyzed that the Communist Party did not announce clear market rescue policies in the communique issued at the 20th Third Plenum, indicating that the official authority does not intend to introduce short-term stimulus policies as in the past.