News last week that China has officially fallen into deflation, with consumer prices dropping 0.3 per cent year on year in July, adds a particularly unwelcome ingredient into the mix. Deflation is feared because declining prices persuade people to defer purchases, cooling the consumer vigour that Beijing has been trusting to propel a recovery from the pandemic. The relevance of the issue reaches far beyond the country itself. Not only is China predicted to contribute 35 per cent of global growth this year — far more than any other economy — it also acts as a locomotive for the whole...