The risk of falling prices on the mainland is highlighted by the economics team at HSBC as the first of its five key macro themes that will dominate the thoughts and actions of policymakers in Beijing this year. It is a fairly safe call, given that People's Bank of China deputy governor Hu Xiaolian said as much in November after the government gave the go-ahead for a 40-basis-point interest rate cut. It is safer still considering that the cut has barely put a dent in real interest rates and, as HSBC points out, real rates must be put on a par with real growth if the mainland's debt dynamics are not to deteriorate. Higher growth, inflation and rates will bring the debt-to-gross domestic product ratio down. Deflation, which is all too evident in producer prices, makes the debt problem worse. "From the perspective of both growth and debt sustainability, further broad-based rate cuts are needed," HSBC says. It expects to get 50 basis points during the first half.