Comments on: On the Effects of Chinese Inflation

By: anonymous

anonymous — Wed, 23 Dec 2009 00:49:47 +0000

Chinese inflation might be beneficial, in a way. If Chinese wages and prices go up with inflation but the nominal exchange rate remains the same, this provides an alternative mechanism for correcting imbalances without the politically difficult step of actually meaningfully revaluing the yuan.

Inflation wouldn’t harm Chinese asset prices either, because the stock market and real estate are the only options for Chinese retail savers seeking to avoid confiscatorily low interest rates on savings accounts.

All of the above might actually boost Chinese stocks, at least the ones oriented towards domestic consumption. Inflationary environments are bad for stocks in Western countries, but in China asset inflation will probably move in lockstep.

By: Marc

Marc — Tue, 22 Dec 2009 14:52:00 +0000

The Chinese is unintelligible — probably the result of English that was put through a translator. As for the point of the post, I wouldn’t buy into any prediction but your main point is something that I feel isn’t stressed enough when people talk about the Chinese economic miracle. Current Chinese government exchange policy benefits a small minority of the population, owners of export oriented industries, while at the same suppressing affluence of the overall population. The size of the policy intervention in terms of reserves represents not a indicator of success but rather a measure of the size of misallocated resources. While Chinese policy brings political benefits and short term economic benefits, over the long term the policy will retard China’s development into a 21st century economy. The rest of the word will move on to whatever the future of the world economy isbecoming and China will be left with yesterdays factories and promises to pay.

By: Nate

Nate — Tue, 22 Dec 2009 13:43:24 +0000

translate.reference.com gives me:

“Oh, interesting, passing to the next roof!”

Your guess is as good as mine as to the meaning…

By: someone

someone — Tue, 22 Dec 2009 12:24:23 +0000

imho inflation and/or ending bubbles will not substantially degrade the manufacturing capacities of china and therefore they will continue exporting almost as much as in the past.

By: David Merkel

David Merkel — Tue, 22 Dec 2009 05:26:54 +0000

Can anyone translate this for me?

By: Greg

Greg — Mon, 21 Dec 2009 23:09:17 +0000

Doesn’t China have a (relatively) free out from inflation?

In the first Bretton Woods agreement, the US “exported” inflation to other countries by artificial pegging of whatever currency to the US dollar. When the other countries couldn’t take it anymore, they demanded the US sell them gold at the Bretton Woods “rate” — and then eventually the system collapsed.

In the current setup (often called Bretton Woods II), the Chinese are in a similar problem because of their “need” to peg the Yuan to the US Dollar. That need stems from a desire to promote trade, but since the US consumer is out of real money, the amount of real trade (not vendor financing) has dropped… so China’s motive to peg the dollar and promote trade is a lot weaker if not evaporated

When China accepts this, they can let the yuan float. The dollar collapses relative to the yuan, and the inflation that China currently “imports” from the US is stopped

Problem solved — or more accurately the problem is sent back to the money printing spendthrifts that can’t seem to live within their means

By: 博莱特压缩机

博莱特压缩机 — Mon, 21 Dec 2009 02:35:55 +0000

呵呵，有意思，路过，来顶下！

By: Indy

Indy — Sun, 20 Dec 2009 13:57:32 +0000

Any investment strategy ideas if one is convinced of either of the two following scenarios: ?

1. China’s stimulus is creating a building, employment, production, and asset-price bubble that will collapse eventually.

and/or

2. China is headed towards rapid inflation and will have to slow itself down to bring it under control.