Monday, April 18, 2011

China Experiencing Western Style Inflation

"“China is moving into a new era, a new norm,” said Dong Tao, an economist at Credit Suisse in Hong Kong. “In the previous decade, inflation was about 1.8 percent a year; in the next decade, it may be closer to 5 percent.”
The implications of such a shift are huge, not just for domestic consumers but perhaps even more so for exports. As wages and production costs rise, coastal factories are demanding higher prices for the goods they ship overseas. That means Americans, Europeans and other buyers will have to pay more for those goods or seek lower-cost suppliers elsewhere. In some cases, retailers are bidding for goods at prices the exporters consider too low.
“I hear that many Chinese exporters are rejecting orders from Wal-Mart and other Western retailers,” Mr. Tao said. “I’ve been covering the Chinese economy for a long time, and I’ve never heard that before.”
Many analysts say the government is going to have to do even more to slow the economy, through measures like placing additional restrictions on lending and continuing to raise interest rates, the textbook methods of fighting inflation by tightening the nation’s money supply" NYTIMES, April 18,2011
  China is experiencing high inflation and this provides an opportunity for American business and some pain for the American consumer who is still spending. The days of yesteryear where we consumed for the sake of consuming are over. The world is entering a new economic reality. More

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