Report
Does the absence of inflation in China significantly reduce inflation in the United States and the euro zone?
Chinese inflation remains very low (-0.3% in 2023), probably as a result of weak domestic demand. To what extent does this low level of inflation in China help the United States and the euro zone reduce their inflation rates? We examine China's export prices, in domestic currency, dollars and euros, and the weight of imports from China in US and euro-zone GDP. We calculate the contribution to inflation (or disinflation) of the change in Chinese export prices (denominated in dollars or euros) on US and euro-zone headline inflation. We find that in 2023, the fall in Chinese export prices caused headline inflation to fall by 0.1 percentage point in the United States and by 0.3 pp in the euro zone. This shows that falling prices in China are far from being a major determinant of disinflation in the United States and the euro zone.
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