China's Post-Pandemic Rebound: Still Heading towards Deflation?

After 3 years of pursuing extreme zero-covid policies, China has finally relaxed its onerous restrictions including strict lockdowns and stressful quarantine protocols. China's economy, which has been on a rollercoaster ride since the start of the pandemic, is expected to experience a significant rebound due to the diminishing leisure and travel restrictions. According to China's first quarter financial report, the world's second largest economy grew at a rate of 4.5% compared with the same quarter a year earlier, surpassing the forecasted rise of 4%. Despite the growth, indicators show that deflationary pressure in China is worsening as consumer prices increased at the slowest pace in two years. Has China's economy really fallen into deflation? Which monetary policies have been and should be deployed to battle these deflation risks? It turns out that the underlying issue behind it all has been going on for years.