🌍 China's CPI falls by most in 15 years

Plus: Unbearably cute

Hi Intriguer. Happy Lunar New Year to all those who celebrate! Don’t know about you, but I’ve been eagerly awaiting the Lunar New Year celebrations this weekend to bust out my ‘festive red’ outfits.

According to the Lunar Zodiac, it’s now the Year of the Dragon. Those born in Dragon years are supposedly blessed with great prosperity and success in life. Sounds pretty wonderful, right?

Not quite. Many people - particularly in China - purposely plan to deliver a ‘dragon baby’ to reap the benefits of the Zodiac year. This has resulted in a nationwide baby surge, which has ironically led to fewer resources and a more stressful, competitive life for these ‘dragon babies’.

I suspect those in China will be preoccupied with other headaches this holiday period, as we’ll see in our top story.

- Helen Zhang, Co-Founder

PS - We’re partnering with our friends at Lykeion to produce a special primer on next week’s Indonesian elections, hitting inboxes this Sunday.

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The Carlson-Putin interview has dropped. Russian President Vladimir Putin has used his two-hour interview with former Fox News host Tucker Carlson to rehearse some familiar lines - appealing to history and citing NATO-Ukraine ties to justify his invasion. He also claims the war could end in weeks if the West stopped helping Ukraine. The Kremlin had earlier suggested Carlson was granted the interview due to his more Moscow-friendly positions.

Zelensky shakes things up. Ukrainian President Vladimir Zelensky has announced he’s dismissed Ukraine’s popular military chief, General Valerii Zaluzhnyi. Coming after days of speculation, the president replaced the general with Oleksandr Syrskyi, who led the defence of Kyiv and then commanded Ukraine’s successful counteroffensive in the region of Kharkiv.

Bolsonaro’s passport seized. Former President Jair Bolsonaro has surrendered his passport amid an investigation into alleged efforts to overturn Brazil’s 2022 election. Authorities also arrested the head of his party (on weapons charges) plus several former aides for their role in “an attempted coup d’etat”. Bolsonaro says the investigation is politically motivated.

Innocent but elderly? A US Department of Justice report has cleared President Biden of criminal wrongdoing, while finding he “wilfully retained” classified files at his home and personal office. The report also says Biden presented himself as an “elderly man with a poor memory”, reigniting questions around his mental acuity.

Neck and neck in Pakistan. Results from Pakistan’s elections yesterday are trickling in after an unusual delay was blamed on a “lack of connectivity”. Final results are due tonight (Friday), with the party of former three-time leader Nawaz Sharif currently neck and neck with candidates linked to the popular (but jailed) former leader and cricket star, Imran Khan. Local media outlets are already calling this an upset, given the pre-election crackdown on Khan and his party.


China stares down the barrel of deflation 

Deflationary pressures are weighing on China’s economy.

China’s Consumer Price Index (CPI) fell by 0.8% year-on-year in January, the biggest single drop in 15 years and the fourth straight month of these declines, according to new figures. The country’s producer price index, which tracks the prices of products right off the assembly line, also showed declines.

The D-word. The worst words start with a ‘d’: deficit, debt, deflation, Denny’s. The opposite of inflation, deflation occurs when prices decrease. 

A drop in prices might sound okay, but it’s terrifying for governments: 

  • It increases the real value of debt, making it harder to repay loans

  • It increases the real value of interest rates, discouraging households and businesses from taking out new loans

  • It can decrease the value of assets, as spooked investors move their holdings into cash (which increases in real value), and

  • It depresses demand as consumers hold off on key purchases, on the expectation that things will cost less if they wait (or simply because they’re startled by their own declining home values)

All this can spiral into a deflationary cycle of lower wages, confidence, and growth, potentially leading to a recession (though there’s still debate on that).

In fact, a lot about deflation is still up for debate - where it comes from, where it leads, and how to respond. This is partly because deflation isn’t common, meaning our data is limited. But it’s fair to say these price declines are generally associated with drops in demand and/or increases in supply.

And in the context of China - as is so often the case - it’s ‘all of the above’.

China’s unique economic model has built up an oversupply of just about everything: property, debt, savings, labour, production. At the same time, it’s facing slowing demand for its exports abroad. And these two forces combined are driving prices down. 

What does this all mean for China? It’s arguable the numbers aren’t as bad as they seem: 

  1. On a month-by-month basis, CPI still rose by 0.3%, and

  2. Part of the annual 0.8% drop can be explained by Lunar New Year spending, which landed in January last year but falls in February this year

Still, the consensus among economists is that these pressures will persist for at least the next six months. Interestingly, economists said the same thing about Japan in the 1990s, and its deflation ended up lasting more than two decades.


So what’s the solution here? Well, that’s also up for debate. We’ve written previously about market expectations for President Xi to respond with mass stimulus, but he’ll be mindful of what that means for debt, financial stability, and his efforts to shift China onto a more diversified model.

Others have long suggested strengthening China’s social safety net, so folks can spend more money rather than having to save so much for a rainy day. But Xi has long been a critic of these programs, saying they can breed idleness.

So while we watch and wait, we saw respected China-watcher Richard McGregor make an important point last week: China has real problems, but we shouldn’t rush to the conclusion that it’s therefore peaked.

Also worth noting:

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  1. 🇭🇰 Hong Kong: Argentinian soccer superstar Lionel Messi has angered fans in Hong Kong after staying on the bench during a friendly there. The crowd booed the team’s co-owner David Beckham, over what one local lawmaker described as a "deliberate and calculated snub". 

  2. 🇭🇺 Hungary: The EU is launching legal action against Hungary’s new ‘sovereignty law’, which targets people accused of undermining the country’s sovereignty. Adding to the long list of recent EU-Hungary rows, Brussels says the law is too vague and lacks judicial oversight.  

  3. 🇰🇮 Kiribati: Five small Pacific Island nations including Kiribati are participating in cyberdefence drills with Japan next week. Japan hopes to strengthen cyberdefences in the Pacific, a key transit point for Japan’s submarine telecommunications cables.

  4. 🇦🇷 Argentina: President Milei has touched down in Israel, drawing praise from his hosts and condemnation from Hamas for announcing he’ll move Argentina’s embassy from Tel Aviv to Jerusalem. Around 20 of the hostages taken by Hamas last October had Argentinian passports.

  5. 🇨🇩 Democratic Republic of the Congo: Thousands have fled the Congo city of Goma after a rebel rocket landed near a university there. Regional leaders brokered a ceasefire with the M23 rebels last year, but it’s been breached repeatedly as M23 nears the city of two million people.


Some recommendations from team Intrigue on how to celebrate Lunar New Year tomorrow (Saturday)


Credits: Nima Sarikhani. 

This adorable photograph of a sleepy polar bear was selected from among 25 others for the People’s Choice Award in this year’s Wildlife Photographer of the Year competition. The photo, captured by British photographer Nima Sarikhani, was shot off the coast of Norway’s Svalbard archipelago. 


On this day in 1996, German scientists synthesised chemical element 112, later named copernicium. Today’s quiz honours their scientific discovery!

1) When was the first chemical element, phosphorus, discovered?

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2) What's the most common chemical element in the universe?

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3) Which of the following world leaders was also a chemist?

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