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this post was submitted on 09 Feb 2024
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chapotraphouse
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Rapid deflation is bad, because it encourages people to save money because it will be worth more later, instead of spending or investing it to put it in to the market, which can cause a collapse of demand and a currency crisis.
Food prices on their own going down is not an issue, however, an deflationary crisis would make it difficult for other countries to borrow yuan because their debt would not only grow in interest but also in deflationary percentage. However, it might also encourage countries to start holding reserves of yuan because they will grow in value. The problem is in the modern economy everything operates through the former, not the latter.
That said, we know that is not the issue because it is just the consumer index pricing that is going down, they aren't reporting on the yuan itself being deflationary.