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.