As the Western world struggles to tame high inflation, fears of persistent deflation are taking root in China. Prices at the factory gate have been dropping for months and in June, fell at the fastest pace in seven years. Consumer prices, meanwhile, have begun to flatline. The property market is stagnating and the economy overall has been losing momentum, fuelling speculation that China could be facing a prolonged period of decline similar to the so-called Lost Decade witnessed by Japan in the 1990s.

China, the world’s second biggest economy, may indeed be entering a new era, after many years of rapid growth. But ING’s Regional Head of Research in Asia, Rob Carnell, says comparisons to Japan are wide of the mark. In this podcast, he explains why.