Deflation is spreading across Asia as China does not only export cheap goods but also provides low-cost plants for Asian firms, depressing wages and property prices in the region, a report suggested yesterday.
A "structural" deflationary trend is likely to accelerate in Asia in the midst of price downslides due to "economic globalisation," the leading Japanese business newspaper Nihon Keizai Shimbun said.
Consumer prices fell in major Asian economies last year, with Hong Kong seeing a particularly sharp drop of 3 percent, the daily said citing a survey by the Japanese Cabinet Office, which handles government statistics.
The territory saw an annual price decline for the fourth straight year, as did Japan, as it continued to blend its economy with that of China, which has allowed free flows of goods and workers between the two sides, the daily said.
An expressway linking Hong Kong with the adjacent mainland industrial center of Shenzhen became operational around the clock at the end of January.
It has prompted a growing number of workers to buy condominiums in Shenzhen and commute to Hong Kong, the newspaper said.
More and more Hong Kong residents are going shopping in China where prices are lower, with real-estate prices lower by half or one third, while many firms are lowering their sales targets and workers are braced for lower income and higher unemployment, the report said.
In Singapore, consumer prices dipped 0.4 percent last year, the first decline in four years, the daily said.
Taiwan saw its consumer prices edge down 0.2 percent due to imports of low-priced Chinese-made clothing and daily necessities. Information-technology firms are moving their production bases to China, the report said.
"China's shift towards a market economy is accelerating the levelling of prices particularly in Asia," Mizuho Research Institute chief economist Atsushi Nakajima told the daily.
On the other hand Indonesia and Malaysia remain immune from the deflationary pressures apparently because of their relative distance from China, the Nihon Keizai said.
The two countries also import far fewer goods and their manufacturers have a much smaller presence abroad than their Japanese, Singaporean and Taiwanese counterparts, it added.
While China is generally considered a cause of deflation, its prices are also sliding, with consumer prices falling 0.8 percent last year, the report said.
Although prices rose in January due in part to higher oil prices, the country is saddled with excess capacity following a recent spree of corporate capital investment which has resulted in an oversupply of goods, it added.
The Cabinet Office survey showed that South Korea was free from deflation last year with a 2.7 percent gain in prices.
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