Illustration: Liu Xiangya/GT
Chinese "low-cost" retailers like Pinduoduo have recently reported strong earnings,
MKS sports but China's frugal consumer mind-set is fueling "a bruising price war" and exacerbating "deflationary fears" in the world's second-largest economy, Reuters reported on Tuesday.
The Western doomsayers' "deflation" fallacy has persisted throughout China's post-COVID recovery. Yet it has failed to shake confidence in China's steady recovery even during the country's most challenging time. With multiple economic indicators pointing to a recovery, such ill-intentioned claims can only be dismissed with a chuckle.
The consumer price index, a main gauge of inflation, was up 0.3 percent year-on-year in May, official data showed on Wednesday. This marked the fourth consecutive month of growth, indicating that China is clearly not experiencing the so-called deflation.
Due to the rise in international commodity prices and the improvement of domestic demand, the producer price index, the gauge of the manufacturing sector, saw its month-on-month decrease turn to an increase, while the year-on-year decline narrowed, according to Dong Lijuan, a statistician at the National Bureau of Statistics.
Deflation refers to a continuous decrease in the price level within an economy, which can disrupt expectations and hinder growth. Yet, the current consumer and factory price levels in China are actually showing signs of improvement, rather than facing the deflationary pressures that have been exaggerated by Western media outlets.
Furthermore, the Western media's hype of deflation, citing the increasing earnings of companies like Chinese e-commerce giant Pinduoduo, is particularly far-fetched and illogical.
The first-quarter revenues of PDD Holdings, which owns Pinduoduo, surged 131 percent while China's leading food delivery app Meituan saw 25 percent growth. Chinese lifestyle retailer Miniso reported growth of 26 percent and Luckin Coffee reported growth of 42 percent, according to data from these companies' official earnings reports.
These strong results are all clear signs of China's consumption and domestic demand recovery, but they were distorted by Reuters as reflecting a "discount war" and indicating "deflation risks."
E-commerce sales increased by 11.6 percent year-on-year in the first quarter, according to official data. The ongoing 618 (named after June 18) online shopping festival also had a strong start, and the just-ended Dragon Boat Festival holidays showed a significant consumption recovery.
More Chinese consumers are embracing e-commerce and buying clothes, food and small household appliances online, many of which are labor-intensive products. It is completely understandable for them to seek the most cost-effective deals.
Meanwhile, spending on electric vehicles, travel, movies and other consumer goods is rising rapidly. This reflects the transformation and upgrading of consumption in China, with the proportion of basic consumption such as food, clothing and daily necessities decreasing in overall spending, while spending to meet higher-level demand is on the rise.
China is promoting a consumption upgrading. In this process, this country will remain a major market for multinational companies. China's consumption transformation and upgrading will contribute to global economic growth.
The IMF recently announced an upward revision of its forecasts for China's GDP growth in 2024 and 2025. Also, international financial institutions such as Goldman Sachs and UBS have released reports pointing out that China's consumption and services sectors will continue their post-pandemic recovery. These assessments are all in stark contrast to certain Western officials and media outlets' claims of investors losing confidence in the Chinese economy and leaving the market.
More and more international organizations and companies are expressing long-term optimism about the Chinese market through practical actions. For example, the latest survey released by the American Chamber of Commerce in China showed that 50 percent of the surveyed American companies listed China as their top or top three investment destination globally. A survey by the European Union Chamber of Commerce in China showed that 59 percent of the surveyed companies consider China as one of their top three investment destinations.
No matter how much the Western naysayers slander China, it is undeniable that China is still the largest engine of global growth. For more and more foreign companies, China has become synonymous with the best investment destination. Multinationals that can expand investment in the Chinese market will definitely enjoy tangible benefits from the high-quality growth of the Chinese economy.
The author is a reporter with the Global Times. [email protected]
