|
| http://israelfinancialexpert.blogspot.com/2010/08/if-they-cant-affo...
rom Say Hello to China's Price/Wage spiral:
Well, China has been printing a lot of money for a long time in order to keep the Yuan low which befitted their export sector. As a result of their policy they accumulated massive foreign exchange reserves, and had giant trade surplus. Since China over one billion people and since most of them where farmers up until the 1990's the money printing didn't cause wages to rise dramatically. (Money flows to places where supply is tight and China had abundant labor)
So the money went in to commodity, real estate, and stock prices in China. But now something totally different is happening. China trade surplus is gone, food prices are rising and wages too. This combined with weak exports, a weak euro is killing China Corporation’s margins and we have a classic wage and price spiral.
Since China produces simple products and since China has focused on quantity and not on quality there is no significant productivity growth to offset the money printing, since the movement to the cities was exhausted. China must slow the money printing or risk hyperinflation
More at the link. | |
|
Coming Chinese crash?
