Analysts are raising concerns about deflationary trends in China’s economy. Joe Biden, in fact, called the world’s second-largest economy a “ticking time bomb.” Recent data indicates a decline in consumer and producer prices for China in July. This is the first time since November 2020, when the COVID-19 pandemic was at its peak, that both indexes have shown a negative trend.

Straight Arrow News contributor Peter Zeihan analyzes this development and raises a cautionary flag. He points out that if this data isn’t just an anomaly, China’s economy could enter a rapid downward spiral in the near future.

Excerpted from Peter’s Aug. 11 “Zeihan on Geopolitics” newsletter:

The current Chinese system has been staring down the barrel of a number of serious challenges for quite a while now, and this new economic data just took the safety off that gun.

Between the demographic bomb that went off a few years ago and the lack of a post-COVID recovery, it’s no surprise that China is facing an economic funk. However, years and years of compressed economic damage are on the brink of bursting out and wreaking havoc on the entire Chinese system.

That’s right; we’re talking about deflation. This is only one month of data, so I don’t want to blow this up quite yet…but consumption has plummeted, there are ongoing trade wars, an oversupply of goods and undersupply of demand in both domestic and foreign markets, and that’s not even the whole picture.

We saw deflation take over Japan in the 90s, and it took them nearly 25 years to pull themselves out of it. The Japanese situation was leaps and bounds better than China’s current situation, so if this data is even partially indicative of China’s economic future, we could be looking at the beginning of the end.