Deflation another sign the ‘economic miracle’ is over

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Proof of deflation will spark fears that China could face the sort of balance sheet recession that Japan faced in the 1990s, when households and businesses built up debt to accumulate property and other assets, and then stopped investing, spending and borrowing when property and asset prices crashed. Japan and China also share deeply unfavourable demographics, with their populations rapidly ageing. Views on whether China faces so-called Japanificaton differ; Bank of America’s Xiaoqing Pi says the problems of debt, demographics and deflation are all present, but argues China’s businesses and households are deleveraging because growth is slowing, not because their...