Signs of Deflation.

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1. Signs of deflation are becoming more prevalent across China, heaping extra pressure on Beijing to reignite growth or risk falling into an economic trap it could find hard to escape. While the rest of the world tussles with inflation, China is at risk of experiencing a prolonged spell of falling prices that—if it takes root—could eat into corporate profits, sap consumer spending and push more people out of work. Its effects would ripple across the globe, easing prices for some products that countries like the U.S. buy from China, but would also deprive the world of important Chinese demand for raw materials and consumer goods, while also creating other problems. Some economists see alarming parallels between China’s current predicament and the experience of Japan, which struggled for years with deflation and stagnant growth. (Source: wsj.com)

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2. Despite China’s government throwing just about everything in its policy basket at the real estate crisis, the sector continues to deteriorate, with sluggish sales, a growing list of unfinished projects, and mounting debt repayments. Consequently, more developers than ever are on the edge of defaulting on their maturing bonds estimated to be worth over 2 trillion yuan ($357 billion). Recent revelations indicate that the crisis, which is stretching into its third year, has now spread to state-owned developers, whose deep pockets had largely insulated them from the chaos, as well as some of the largest private developers. These include some of the biggest names. For instance, earlier this month, state-backed Sino-Ocean Group Holding Ltd. told creditors it’s been working with two major shareholders on its debt load. The nation’s second-largest developer by sales, China Vanke Co., said that the home market is “worse than expected.” Meanwhile, a key unit of Dalian Wanda Group Co. warned creditors of a funding shortfall of at least $200 million for bonds coming due. And to cap things off, Country Garden Holdings Co. Ltd., China’s largest developer, reported its first annual loss since its Hong Kong IPO in 2007. (Source: caixinglobal.com)