Inflation Slowing China’s Export Engine
Posted by WARREN MOSLER on January 31st, 2011
This is the force that ‘naturally’ brings the currency into line, and then can make it a lot weaker.
And the only way China knows to ‘fight it’ is probably with moves that will will result in a recession.
Inflation Slowing China’s Export Engine
Published: Sunday, 30 Jan 2011 | 10:46 PM ET
Inflation is starting to slow China’s mighty export machine, as buyers from Western multinational companies balk at higher prices and have cut back their planned spring shipments across the Pacific.
Markups of 20 to 50 percent on products like leather shoes and polo shirts have sent Western buyers scrambling for alternate suppliers. But from Vietnam to India, few low-wage developing countries can match China’s manufacturing might — and no country offers refuge from high global commodity prices.
Already, the slowdown in American orders has forced some container shipping lines to cancel up to a quarter of their trips to the United States this spring from Hong Kong and other Chinese ports.
January 31st, 2011 at 12:48 pm
I was under the impression that China’s currency was significantly under valued relative to most other major currencies and that letting it “float” might help relieve some of their inflationary pressures?
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SethM Reply:
January 31st, 2011 at 10:23 pm
The Chinese political system is all about control. Floating or anything else that might impinge on the bureaucrats’ room to manage things faces an uphill battle.
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January 31st, 2011 at 4:40 pm
John that’s correct but that’s the last thing China wants to do.
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January 31st, 2011 at 11:44 pm
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