Impact of CHINA economy
The popular focus on the yuan, America's trade deficit and jobs as China's main impact on the rest of the world misses the point. China's growing influence stretches much deeper than its exports of cheap goods: it is revolutionising the relative prices of labour, capital, goods and assets.
For instance, the oil price. Since the beginning of last year, oil prices have doubled, yet in contrast to previous oil shocks, inflation rates remain low and global growth robust. The answer to this riddle is China. To the extent that oil prices are driven up by strong Chinese demand rather than, as in the past, an interruption of supply, they are less likely to hurt global growth.
And the impact of higher oil prices on inflation has been offset by falling prices of all sorts of goods from cameras and computers to microwaves and bicycles—thanks to China.
Another oddity is that, while the prices of most goods are falling, house prices are soaring in many countries. Again, enter the dragon. Cheaper goods from China have made it easier for central banks to achieve their inflation goals without needing to push real interest rates sharply higher.
posted by yuhu @ 10:12 AM
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