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Depending on the situation, governments can choose different policies!|
Apparently now we have
(1) Pressure on commodity prices - started with wheat, cotton produce in the 2010 harvest!
This has now spread on to different categories of products. This could spark another round of inflation. With American QE2 or QE3, there is opportunity for another spurt of FDI, that could spark hyperinflation around the globe!
(2) Logistic bottleneck in the low income inland provinces!
Even if China is able to increase production, mint the money to create a demand for the supplies - it has difficulties to deliver the products. (With China ODI in crude oil, gas production, increases in coal production, more fast growing timber plantation species, impending increase in plastic, chemical, rubber, metal, cement, bricks and other consumer products) - imagine the cities of Chengdu, Chongqing, Wuhan, Xian - some 55 million people - if the per capita is to rise to US$10,000 - imagine the increases in delivery needs! Not to mention the 50 million people in the capital cities of other inland provinces!
(3) Continuing big increases in new homes, new commercial/industrial property, automobile sales, big growth in money supply due to exports, and huge foreign direct investment - means more liquidity in China in the coming years! The threat of QE2 or QE3 adds to this fear!
[ Last edited by greendragon at 2011-1-5 01:38 PM ]