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Chinese Inflation

February 19th, 2016

My impression about this is coincident with Hong Liang and Yu Song, Goldman Sachs in Hong Kong: the acceleration in monetary growth and the credit in January suggest that inflation probably has more legs to run. The problems that have evil to bring to us.UU. also have an effect on inflation in China issue since policy of cutting rates the Fed has increased the existing differential rates, which resulted in an increase in the flow of capital to China. The strong growth of foreign direct investment during the month of January, doubled in volume from the same month of the previous year. The entry of money by investments along with the trade surplus are factors that threaten to aggravate the problem of inflation, in addition to increasing the risk of generating a bubble in asset prices.

If pressures inflationary receiving outside China proves little, in a note from the WSJ, is drawn to the oriental country cause part of international inflation for major economies as a result of the rise in prices of Chinese products because of the increase of the costs of labour and intermediate products. Anyway, this hypothesis was discarded by a study conducted by Tarhan Feyzioglu (MFIS in Beijing) and Luke Willard (OECD in Paris), by the low participation of Chinese products in the total consumption of these countries. What is certain, is that one of the consequences of higher inflation in China is that you triggered an increased demand for assets anticipating subsequent hikes which makes that commodity prices are at record levels. The Chinese Government has tried a solution to rising prices in the Argentine style (and Venezuelan and. well, there are several countries that are implementing it), through price controls. I imagine that at this point no one can think that price controls are effective against inflation, since how very well said James McCormack, head of Fitch Ratings Hong Kong Ltd: price controls do not work because they do not attack the existing imbalance between supply and demand.

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