Is China exporting deflation? Deutsche Bank says not so

Deflation across China’s economy worsened last year, coinciding with a decline in its currency to near a five-year low. Does that mean the world’s second-largest economy is exporting deflation? Maybe not, according to Deutsche Bank.

An economy-wide inflation reading slipped to minus 0.5% point last year, according to a Bloomberg gauge, while the yuan has dropped 6% against the US dollar since a surprise devaluation by China’s central bank in early August.

Even so, that’s not necessarily a harbinger of global deflationary pressure, according to Torsten Slok, the chief international economist at Deutsche Bank in New York.


“We need to see a dramatic depreciation of the RMB of 25% or more before it would begin to have a measurable impact on US inflation,” Slok wrote in a report, referring to the renminbi, another name for China’s currency.