The National Bureau of Statistics of China recently released the Consumer Price Index (CPI) and the Producer Price Index (PPI) data for June this year.

Although the CPI has yet to indicate that the economy is falling into deflation, the PPI clearly shows that China is facing the risk of deflation.

Anbound's research team points out that China should get ready to battle the deflation once again, and this deflationary cycle might last longer than the earlier one.

However, at the same time, the China’s policy on macro economy should stay focus on balancing, and should not overcorrect, as this is the way to sustain a longer period of stability.