Online Reporter
The global economy resembles a chessboard, with each region playing its own strategy.
Three stories now connect in telling ways: China is battling deflation with a new slogan, India is profiting from discounted Russian crude, and emerging markets are racing back to international bond markets amid a wave of investor optimism.
China’s leaders love slogans. From “supply-side reforms” to “housing is for living, not speculation”. These slogans often signal where policy is headed. The latest phrase is “anti-involution”. Involution describes the grind of producers that expand capacity, slash prices, and watch profits evaporate. Anti-involution aims to stop that spiral by curbing excess capacity.
The mismatch is stark. China’s solar capacity is already more than twice the global demand, and electric vehicle battery output is roughly 1,3 times more than what is needed. The price consequences are everywhere. The gross domestic product deflator has decreased for nine consecutive quarters, while consumer prices have averaged just 0,1 percent year-on-year since mid-2023.
Unlike in 2015, when commodity swings did most of the damage, deflation is now broad-based across manufactured goods.
Beijing faces a tough choice: accept slower growth by cutting capacity, or continue overproducing and deepen the trap. What is really needed is rebalancing — shifting towards household consumption, especially for migrant workers and rural families whose saving rates exceed 40 percent.
While China wrestles with deflation, India has turned itself into a refinery hub for Russian crude. The mechanism is simple: United States (US) and European consumers buy Indian goods, delivering dollars. Those dollars purchase discounted Russian oil. India refines the oil and resells it worldwide, while Moscow collects hard currency. Before 2022, Russia supplied less than 1 percent of India’s crude. Today, it exceeds 30 percent, or about 1,5 million barrels a day.
Much of that inflow is exported as higher-value fuels. Indian refiners pocket healthy margins; Russia’s war chest is replenished; and Western taxpayers continue to finance Ukrainian war efforts. Washington’s patience has, however, become thin. — Moneyweb
