Great China's deflation boom and doom

China is the only economy in the world enjoying a deflationary boom. Hong Kong gets hurt because it is a recipient of price deflation implying that the TerritoryÆs assets will under-perform ChinaÆs in the medium-term.

Deflation has created an economic puzzle in the Greater China economy. The Mainland is enjoying an economic boom on the back of pricing power erosion. But Hong Kong is suffering from severe economic pains, as deflation has taken its toll in economic growth Chart. How can the Mainland enjoy a deflationary boom while the SAR suffers an economic doom under the same deflationary environment What are the implications for their respective asset markets

Deflation has...

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