Is the fear of Japanese type price destruction worrying China?

Mixed signals 

• ·         The flash HSBC Purchasing Managers' Index (PMI) indicated  49.8, after registering a 49.6 final reading in December, 2014. (though less than 50)

• ·         China's economy expanded at the slowest pace in 24 years in 2014, with gross domestic product rising at an although impressive 7.4 percent, 

• ·         The People's Bank of China (PBOC) in November surprised markets with an interest rate cut, its first since 2012

•            Some Chinese consumers are reportedly postponing purchases in anticipation that prices will fall further in the future, a classic signal of deflation  

·      China’s central bank used short-term tools   to overcome a seasonal cash squeeze because of  capital outflows.

·         The People’s Bank of China used reverse-repurchase agreements to inject 50 billion yuan ($8.05 billion).

·        The central bank also rolled over 269.5 billion yuan of three-month loans extended to lenders in October and used the medium-term lending facility to add a further 50 billion yuan to smooth supply.

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Sources:

http://www.cnbc.com/id/102358011#.

http://uk.reuters.com/article/2015/01/23/uk-china-economy-pmi-idUKKBN0KW04920150123

http://www.bloomberg.com/news/2015-01-23/china-s-stock-index-futures-rise-before-flash-pmi-data.html

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