News briefing

The National Bureau of Statistics (NBS) of China recently announced that the annual growth rate of the consumer price index (CPI) dropped to zero in June, whereas the annual growth rate of the producer price index (PPI) dropped further to -5.4%. Given the fact that the performance data of both were worse than expected, indicating that the demand has continued to be sluggish with weak recovery, experts are also worried that the economy might sink into deflation in the next few month.

 

Impact analysis

 

As per the definition by the International Monetary Fund (IMF), deflation refers to a general and continuous decline in the overall price level, which usually adopts the CPI as its primary indicator. Hence, when the annual growth rate of the CPI has declined for two consecutive quarters, it should meet the definition of deflation. Based on the official data from mainland China, its CPI has fallen below 1.0% since March this year, and further dropped to 0% by June, showing that mainland China is facing increasing threats of deflation and an economic recession. Besides, economists have generally believed that the negative impact of deflation is greater than that of inflation, which usually includes a decline in consumer spending, a slowdown in investment activities, increased debt pressure, and heightened market uncertainty.

As mainland China is the major manufacturing and consumer region for consumer electronics products worldwide, the sluggish market demands on mainland China would, as well, have affected the PCB export performance of Taiwan. As per the statistics, the PCB export value of Taiwan in the first half of 2023 declined by 26.9% compared to the same period last year. Among them, mainland China is the largest export destination for Taiwan, accounting for 36.9% of the overall export value. For now, it has decreased by 38.4% year-on-year, a higher drop than the average, and is considered the primary reason for the decline. Given the context, people from all walks of life failed to witness the rebound dividend brought about by the re-opening after the epidemic in mainland China, and the scenario has, on the contrary, turned into uncertain factors on the global market. As such, the road to recovery in the second half of the year will be full of challenges as Taiwan’s PCB industry relies mainly on consumer electronics such as mobile phones, computers, and others.

 

Source: Compiled by the IEK, Industrial Technology Research Institute