Deflation Approaches for China

The Wall Street Journal asks:

China looks like it will soon slip into deflation. But will it be the good kind or the bad kind?

Steep falls in global commodity prices drove a drop in China’s producer-price inflation to 2.0% in November from 6.6% in October.

That’s the lowest level since April 2006, while data Friday is likely to show consumer-price inflation of less than 3% — it was over 8% until May this year. On current trends, headline inflation indicators could turn negative in early 2009, economists say.