China needs structural changes to combat deepening deflation

China is currently facing significant economic challenges characterized by deepening deflation, a slowdown in manufacturing, and dwindling international trade. As reported on June 17, 2025, these issues have arisen due to a lack of structural changes within the country’s economic framework, as highlighted by analyst Davy Wong. Wong emphasizes that there is a critical need for the Chinese government to take decisive action, which includes addressing overcapacity within various sectors, enhancing consumer confidence in the economy, and ultimately increasing the disposable income of the population. To counteract deflation effectively, Wong mentions that it is essential for the Chinese regime to instill a sense of confidence among consumers and businesses alike. This involves spurring market vitality through policy reforms and strategic initiatives aimed at revitalizing the economy. The sluggishness seen in sectors such as manufacturing is contributing to the broader economic malaise, making it imperative for the government to act. The current economic state of affairs is not only crucial for China but also has significant global implications. As one of the world's largest economies, China's performance can impact international trade and economic dynamics. Analysts frequently raise concerns about how prolonged economic struggles in China could lead to reduced demand for imports from other countries, thereby affecting global supply chains and economic growth elsewhere. In conclusion, unless the Chinese government implements the necessary structural reforms and encourages domestic consumption, the nation may continue to grapple with these pressing economic issues. Davy Wong’s insights underline the urgency for action to restore balance and confidence in China’s economy to prevent further deterioration.