Deflated dreams

China bets on tech to avoid slowdown

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The weeklong National People's Congress of the Chinese Communist Party this year was — as it usually is — a celebration of President Xi Jinping's leadership. The optimism on display might sit somewhat awkwardly with the rest of the economic news out of China, however. Deflationary pressure has become difficult to ignore, with prices falling for consumers over the first months of the year, signifying that demand is still weak and overcapacity a problem. This follows two years in which broad measures of prices appear to have slipped into deflationary territory. Questions about the excess capacity in the economy will become even more urgent as and when various trade restrictions and tariffs promised by the new administration in the United States begin to bite. The government has been quite sanguine in public about the tariffs, indicating that domestic issues take precedence — but that confidence should be dismissed. In this case, external factors will only intensify domestic structural problems, which have been building up for some time.