China Will Avoid Stagflation: HSBC

Despite witnessing rising prices and slowing growth, any risk of China facing stagflation is remote, according to one HSBC analyst. HSBC Chief Economist Xiaoping Ma believes it would be helpful for China to look back on how developed economies endured a painful period of stagflation during the 1970s.

Lessons from stagflation in the 1970s

Ma points out that during the mid-to-late 1970s, most OECD countries, including the U.S., the U.K. and Australia, witnessed stagflation characterized by simultaneous co-existence of high unemployment, slow growth and rising inflation. In response to the stagflation, the three countries initiated different policy measures. However, in general, they tightened monetary policy and adopted expansionary fiscal policies with increases in budget deficits and public spending. While the U.S....