The China’s #deflationary #nightmare seems now at full speed
The worst-case scenario is happening in China: nominal and real wages in China are starting to fall sharply. According to Bloomberg, nominal wages in Beijing are falling by 2.7 per cent year-on-year and in Guangzhou the drop is even more frightening: 4.5 per cent!
These wage falls now seem to be generalised, both for current employees and for new ones. And it seems that no economic sector has escaped the fall in nominal wages.
With the current #deflation of 0.5 %, real wage falls are as high as 4% ! The deflationary spiral now seems unstoppable in China.
If the authorities fail to stop this real fall in wages now, it could be very difficult to prevent an unprecedented crisis in China in the short term. And eventually China will export this deflationary spiral to the whole world, but especially to the developing world, unable as it will be to make its own industrial take-off.
There's no point in commenting any further on this dramatic situation in China, because it's nothing new to anyone who's read what I've been writing for the last two years. What really seems to have triggered the deflationary spiral was the artificial rise in energy prices by the oil cartel, OPEC Plus. This has eroded the purchasing power of world consumers, but especially of developing countries like China. And without this needed rise in the purchasing power, maintaining an artificial property bubble like China's was almost impossible.