Deflation is threatening the Chinese Economy. China’s Government has not been helping matters. A specter is hanging over China, namely the dreaded “D” word, or deflation. Over the past year, prices have been falling across its economy, giving rise to fears that China is on the cusp of a deflationary spiral. That is very bad news for its economic growth prospects. Even worse, to solve this brewing crisis, the Chinese Government has sought to boost output and supply across the economy. But that response ignores the main factor underlying China’s deflation problem, which is the persistently low share of private consumption in its gross domestic product (GDP). If Chinese private consumption levels remain depressed, raising output and supply could turn what is now a nascent deflation crisis into a full-blown downward price spiral. Last summer, data released by the National Bu...