China’s deflation cycle is likely approaching its end, according to Zhaopeng Xing of ANZ. He expects both producer and consumer prices to have risen in March, with the 1Q GDP deflator likely returning to positive territory for the first time in three years. While higher oil prices are contributing to inflation, he notes they are unlikely to resolve structural imbalances and may even weigh on household consumption. Still, policymakers may prefer “bad” inflation over deflation, with China expected

China’s deflation cycle is likely approaching its end, according to Zhaopeng Xing of ANZ. He expects both producer and consumer prices to have risen in March, with the 1Q GDP deflator likely returning to positive territory for the first time in three years. While higher oil prices are contributing to inflation, he notes they are unlikely to resolve structural imbalances and may even weigh on household consumption. Still, policymakers may prefer “bad” inflation over deflation, with China expected to continue pursuing reflation by curbing price wars.