Despite the concerns about China's deflationary pressures, the government's reluctance to undertake policies that would encourage people to spend and work is concerning. The lack of investment in social safety nets and targeted transfers to households rather than state-owned enterprises is particularly striking.
China's economic model still relies heavily on investment-led growth, with the government hoping that infrastructure development and manufacturing expansions will create jobs and subsequently boost demand. However, this approach has led to mounting debt and rising complaints from urban residents about the disruption caused by new road construction and other development projects.
As one analyst noted, the government's focus on investment has been underwhelming, particularly in areas that could provide tangible benefits to ordinary people. The expectation that prices will continue to drop due to deflationary pressures is not only unlikely but also unhealthy for the economy in the long run.
A more balanced approach that incorporates targeted fiscal policies and socially beneficial investments is needed to address China's economic challenges and ensure sustainable growth.