Why China is grappling with falling prices – and being compared to Japan

China's prices are falling as the spectre of deflation clouds the outlook for the world's second-largest economy [File: Yew Lun Tian/Reuters]

As the rest of the world grapples with rising living costs, China is facing the opposite problem: falling prices.

In July, the world’s second-largest economy officially slipped into deflation for the first time in two years as consumer prices fell 0.3 percent. Prices had already flatlined for much of 2023, bucking the global trend of spiking prices for everything from energy to food.