Trend recentlyis producer price index PPI has been falling (i.e. inputs cheaper). Core CPI rising (i.e. minus food+energy volatility, really deflating pork prices from overproduction recovering from african swine fever). IMO proxy indicator that cheap power is driving efficiency divident. Western reporting last couple years fixated on porkflation than deflation due to pork deflation (big part of CPI basket) because... well western media.
My intuition is also that PRC deflation = PRC producer simply better at cheaper inputs and value engineering products. A 10K USD domestic EV today is significantly better than a 10k USD domestic IC from 5 years ago. PRC manufacturing very good at Model T-ing everything. And it's the "correct" model since PRC is large income disparity society. Common prosperity means driving quality/costs down so the 5000k USD per capita in tier 3_ cities have something reasonable to buy. And also makes migrating/sustaining to those cities viable because T1s/T2s are full. It's why we see stats like aggregate sales during major events (11/11) or travel going up, but per capita spend down. Market is creating products forbottom quantiles who are price sensitive to consume. Common prosperity is giving T3+ cities a taste of T1/T2. Get's obfuscated by western reporting because their source in T1 cities are buying less Prada handbags because they have to shut down one of their 3 hotpot restaurants. Also just general PRC branding improving in popularity and domestic blends tend to be cost-concious, this gets labelled as consumption downgrading (and some of it is), but a lot of it is also PRC value-driven products are increasingly competitive with imports. Enough to drive patriotic purchasing. Bonus this means very cost-competitive goods for exports and displacing (western) incumbants on increasingly higher value sectors.
Then add government driven consumption, i.e. vouchers for cars, appliances, tourism, industrial upgrades. Underdeveloped safety net = people will have propensity to save. So more prudent for gov to pull targetted consumption lever, IIRC accounting for gov social transfers on top of household consumption, PRC consumption around OECD average. They can consume more, but not as prolific as Americans unless CCP gets more sectors to extract service rent. Which I don't think they want to, at least not as much as US - crippling education debt not good if you want to maximize broad talent development. The other generic suggestion is improve investment market / financialization, and there's some efforts to. But to be blunt, too much of PRC poor are undereducated and vunerable to... not sound investment. IMO recipe for social disaster when grandma gambles away nest egg on stocks because mass speculation / herd mentality / scams / superstition . AKA shenanigans. So really just leaves household saving what they need, buying what they can afford, and gov boosting consumption via levers, and indy policy stretching more consumption per rmb by making goods better/cheaper.
My intuition is also that PRC deflation = PRC producer simply better at cheaper inputs and value engineering products. A 10K USD domestic EV today is significantly better than a 10k USD domestic IC from 5 years ago. PRC manufacturing very good at Model T-ing everything. And it's the "correct" model since PRC is large income disparity society. Common prosperity means driving quality/costs down so the 5000k USD per capita in tier 3_ cities have something reasonable to buy. And also makes migrating/sustaining to those cities viable because T1s/T2s are full. It's why we see stats like aggregate sales during major events (11/11) or travel going up, but per capita spend down. Market is creating products forbottom quantiles who are price sensitive to consume. Common prosperity is giving T3+ cities a taste of T1/T2. Get's obfuscated by western reporting because their source in T1 cities are buying less Prada handbags because they have to shut down one of their 3 hotpot restaurants. Also just general PRC branding improving in popularity and domestic blends tend to be cost-concious, this gets labelled as consumption downgrading (and some of it is), but a lot of it is also PRC value-driven products are increasingly competitive with imports. Enough to drive patriotic purchasing. Bonus this means very cost-competitive goods for exports and displacing (western) incumbants on increasingly higher value sectors.
Then add government driven consumption, i.e. vouchers for cars, appliances, tourism, industrial upgrades. Underdeveloped safety net = people will have propensity to save. So more prudent for gov to pull targetted consumption lever, IIRC accounting for gov social transfers on top of household consumption, PRC consumption around OECD average. They can consume more, but not as prolific as Americans unless CCP gets more sectors to extract service rent. Which I don't think they want to, at least not as much as US - crippling education debt not good if you want to maximize broad talent development. The other generic suggestion is improve investment market / financialization, and there's some efforts to. But to be blunt, too much of PRC poor are undereducated and vunerable to... not sound investment. IMO recipe for social disaster when grandma gambles away nest egg on stocks because mass speculation / herd mentality / scams / superstition . AKA shenanigans. So really just leaves household saving what they need, buying what they can afford, and gov boosting consumption via levers, and indy policy stretching more consumption per rmb by making goods better/cheaper.