mardi 14 avril 2015
Explaining the collapse in global inflation rates – step forward China
Posted on 13:26 by nice news
We’ve been worried for years about the prospect of a sharp slowdown in China and the knock on implications for those countries and companies that have grown reliant on a strong China over the last decade, namely commodity exporters, some emerging markets, and particularly emerging market commodity exporters (eg see If China’s economy rebalances and growth slows, as it surely must, then who’s screwed?). Weak trade data over the weekend, together with mixed readings on loan growth and FX reserves earlier this morning, have done little to alleviate these fears.
But potentially the biggest effect that a China slowdown is having on the rest of the world may be in the collapsing inflation rates we’re seeing almost everywhere. It was only a few years ago that most strategists were arguing that an overheating China with its rocketing wages and strengthening Renminbi was set to export inflation to the rest of the world. These forecasts have turned out to be entirely wrong, and instead China seems to be exporting substantial deflation, and that’s over and above the effect that a slowing China is having on commodity prices.
But potentially the biggest effect that a China slowdown is having on the rest of the world may be in the collapsing inflation rates we’re seeing almost everywhere. It was only a few years ago that most strategists were arguing that an overheating China with its rocketing wages and strengthening Renminbi was set to export inflation to the rest of the world. These forecasts have turned out to be entirely wrong, and instead China seems to be exporting substantial deflation, and that’s over and above the effect that a slowing China is having on commodity prices.
Explaining the collapse in global inflation rates – step forward China
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