Deflation coming

Here’s what else you need to know about China today:

China is on the brink of deflation, according to data released (in Chinese) by the National Bureau of Statistics (NBS) today. In June, the consumer price index was flat year-on-year, the weakest rate since February 2021, and declined 0.2% compared with the previous month. Factory gate prices fell even further at 5.4% year-on-year and down 0.8% compared with the month prior.

The data is another signal that, while China’s economy is still growing, its recovery is slowing down. It adds to growing concerns about deflation that will likely spur more speculation about a potential stimulus from the Chinese government, as it seeks to hit its official economic growth target of 5% for the year.

A knife attack on a kindergarten killed six people, including three children in China’s southern Guangdong Province this morning. The other three victims are a teacher and two parents, according to news reports.

The attack occurred on Monday at 7:40 a.m. local time while parents were dropping their children off for summer classes. The Lianjiang Public Security Bureau said that local police arrested a 25-year-old man, surnamed Wu, at 8 a.m.

Footage of the attack sparked shock and outrage across Chinese social media, becoming one of the top trending topics on Weibo with more than 250 million views as of noon on Monday. While firearms are banned in China, knife attacks have grown in recent years: The BBC reported that at least 17 knife attacks have occurred in schools, colleges, and universities since 2010 — 10 of which have happened between 2018 and 2023.

Chinese authorities slapped a 7.12 billion yuan ($984 million) fine on Ant Group, the fintech firm founded by billionaire Jack Ma (马云 Mǎ Yún), ending a years-long regulatory overhaul of the company that in 2020 had kicked off Beijing’s broader crackdown on China’s internet sector.

Ant Group was fined for breaking a number of rules related to consumer protection and corporate governance, as well as “business activities in banking and insurance, payments, anti-money laundering, and funds sales,” according to a joint statement (in Chinese) released on Friday by the China Securities Regulatory Commission (CSRC), the People’s Bank of China (PBOC), and the National Financial Regulatory Administration (NFRA). “Most of the outstanding problems in the financial business of platform enterprises have been rectified,” the statement said.

“We will comply with the terms of the penalty in all earnestness and sincerity and continue to further enhance our compliance governance,” Ant Group said in a statement on Friday. The company has since launched a $6 billion share buyback plan — nearly 70% less than its proposed initial public offering (IPO) price in 2020 of more than $34 billion, which would have become the biggest share sale in history at the time.

U.S. Treasury Secretary Janet Yellen wrapped up her trip to China yesterday, where she held a total of 10 hours of talks over two days that “served as a step forward in our effort to put the U.S.-China relationship on surer footing,” according to the official readout from Washington.

“My purpose is to make sure that we don’t engage in a series of unintended escalatory actions that will be harmful to our overall economic relationship with one another,” Yellen said in an interview with CBS News yesterday. Her visit marks the second trip to Beijing by a Biden administration cabinet member in less than a month, following Secretary of State Antony Blinken.

Yellen also had lunch with six Chinese female economists in Beijing on July 8, in an effort to call attention to gender diversity following meetings with China’s mostly male government officials. Those economists were criticized on Chinese social media by some users who accused them of being “traitors” for meeting Yellen and being “radical feminists.”

Chinese state media: Xí Jìnpíng 习近平 “met with visiting Russian Federation Council Speaker Valentina Matviyenko in Beijing.” That is the entire report on the meeting on the English-language website of Xinhua News Agency so far. The Chinese-language report is a little longer and notes that the “development of Sino-Russian relations is a strategic choice made by the two countries based on the fundamental interests of their respective countries and peoples,” etc.

Xinhua also notes Xi’s meeting with the visiting Prime Minister of the Solomon Islands Manasseh Sogavare in Beijing (in English, Chinese).

The print edition of the Party paper, the People’s Daily, today highlights General Secretary Xi’s valuable thoughts on the future of China as expressed during a recent inspection trip in the city of Suzhou.