East Asia Econ

China – the monetary case for lessening deflation

The lessening of deflation has largely been driven by external factors. But domestic monetary developments have helped: the increase in PBC liquidity injections, and as shown again by today's March monetary release, the stabilisation of M1 growth and the M1:M2 ratio.

Paul Cavey

Apr 13, 2026 • 2 min read

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East Asia Today

China's PBC is increasing liquidity injections, with only limited feedthrough to broader monetary conditions. In Japan, by contrast, the BOJ is tapering, but bank lending growth remains strong. Korea's exports for the first 10 days of April increased sharply, pushing up the trade surplus.

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Korea – exports up again in April

Trade data for the first 10 days are volatile. But the April data are still worth highlighting. They show strong exports and a rising trade surplus, which offers a contrast with the BOK's concerns about the cycle, and the market's worries about the KRW.

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Last week, next week

Four developments stand out: the return of inflation in China; cycle nervousness in Japan and Korea; that's despite a continued strong AI cycle that is boosting exports in Korea and Taiwan; and the visit of the KMT chair to China, the importance of which depends on Trump's meeting with Xi.