[photopress:property_forbes2007.jpg,full,alignright]Forbes magazine represents right-wing business thinking in the United States. Not the nutty right. But well to the right of center. Bear that in mind when you read that it considers that China’s inflation policy spells trouble.
It points out that China’s consumer price inflation came in at 8.5% for April, reflecting strong and continuing pressure on prices. It says the main driver continues to be food, although prices of other goods are also showing upward pressure.
April food prices are up by 22.1% from a year earlier.
It goes on that non-food inflation remains relatively low at 1.8% and points out, logically, it is only a matter of time before wages increase in response to the high level of food-price inflation and companies begin to pass on increased costs to consumers.
This high inflation compels the monetary authorities to continue monetary tightening.
That is Forbes making two presumptions. The first that this high inflation rate will go on for ever. And the second that the government will act in any way which fits in with the Forbes capitalist — it boasts that on its front cover — view of life.
Once it has gotten to that conclusion it can logically point out this will create difficulties for stock market and real estate investors who are used to easy credit.
And it then comes to the conclusion that persistent inflation and resulting restrictive monetary policy may also spell trouble for the financial sector.
It finishes with a final flourish which suggests that China will have its own sub-prime crisis. ‘There is some risk that this could greatly impact property prices, and that banks will see a higher proportion of non-performing loans.’
Perhaps. Possibly. Maybe.
Especially if you have a capitalist view of the world.