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A cartoon published by a Chinese newspaper illustrating increasingly clear signs of deflation in China's economy. Indeed, China's manufacturing sector has yet to recover, while domestic demand remains sluggish. / The Beijing News

Signs of deflation, or falling prices amid an economic downturn, are becoming increasingly pronounced in China as the country's manufacturing sector returned to contraction in October after a brief rebound. With no clear solution immediately in sight, negative forecasts for the Chinese economy are likely to persist for a considerable period.

In a market economy, business conditions are generally assessed using the manufacturing Purchasing Managers' Index (PMI), an indicator calculated by surveying corporate purchasing managers about new orders, production, employment and other factors. A reading above 50.0 indicates expansion, while a reading below that level signals contraction. For China's economy, which is struggling with extremely weak domestic demand that has become a chronic problem, it is essential that the manufacturing PMI somehow exceed 50.0.

Fortunately, the index barely crossed that threshold in September, reaching 50.1 during a month that included a weeklong National Day holiday, one of China's biggest holidays. Although the figure was far from satisfactory, economic authorities could hardly have asked for much more. After all, the index had remained below 50.0 for two consecutive months, recording 49.2 in July and 49.8 in August.

However, according to reports on Nov. 1 by The Beijing News and other media outlets citing data from the National Bureau of Statistics (NBS), China's manufacturing PMI returned to contraction in October after just one month of expansion. It recorded 49.3, the second-worst reading in the preceding four months. This represented a drop of as much as 0.8 points from the previous month.

Particularly painful was the decline in the new export orders index, which fell by 1.3 points from 50.0 in September to 48.7 in October. This was all the more significant because exports had been virtually the only remaining pillar supporting the economy.

Given that the manufacturing PMI returned to contraction after just one month, the outlook is naturally bleak. It would also be fair to say that there are no clear factors in sight capable of significantly stimulating and driving the economy.

The problem appears to be that deflation, or falling prices amid an economic downturn, a phenomenon even worse than inflation, has virtually become an everyday reality.

There is nothing surprising about information and communications technology (ICT) businessman Yang Yongchang quietly sighing as he says, "I can't see what lies ahead. It looks like we'll have to endure more hardship for the time being."

Nevertheless, China's economy is unlikely to miss its growth target of 4.5% to 5% this year. The target was set quite low, and cumulative growth in the first three quarters reached 4.6%, making such a prediction reasonable.

However, the situation from next year onward is difficult to predict with confidence. In fact, it would not be unreasonable to expect dark clouds to gather over the economy. This suggests that stronger measures to stimulate domestic demand and other areas will be needed going forward.

Yet considering that the numerous measures introduced so far to stimulate domestic demand have largely failed to produce significant results, it would not be far off the mark to say that the Chinese economy remains a long way from a smooth road ahead.

China's ambition to overtake the United States in the near future and become the world's leading power, or G1, on the back of booming artificial intelligence (AI) and robotics industries appears to be faltering.

                                                                                                            Hong Soon-do