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The China Conundrum – October update

gross domestic product

Image by CobraVerde via Flickr

China’s experiment with global supremacy is very much on but the last September quarter marked the second consecutive decline in GDP numbers for the nation even as pace of accelerating Yuan caught up with the desired by US pressure to postpone drastic action on the currency front.

Wages have been up in China all year and cost of Capital Imports will continue to go up for the next 2-3 years at the very least, marginally hitting production. china GDP is also dependent on retail spend but much less than the 75% dependence in the US and thus inflation growth here is unlikely to translate into nominal GDP growth. However, inflation is nowhere near being a scare with a CPI of less than 1% for September. In Q3 GDP came down to 9.6% down from nearly 12% in March 2010.

The consumption story is intact in China and being encouraged with the new 5 year plan making valid plans to increase consumption while building China’s reputation as clean and green. Rural and urban incomes have grown by 10% and 8% in the quarter.

China has howver upset Japan’s apple cart and with prudent forex policy will keep most of its nearly $2.8 trillion surplus.

The 12th plan document released last week focuses on the oft mentioned complaint on inequitiesbetween rural and urban growth and other classes left bewildered by the ‘economic miracle’ It also destresses focus from the statistical growth in infrastructure achieved in the last 2-3 plans.

POBC’s rate hike yesterday also underlines policy makers being ready with the reponse to the developing inflationary scenario having already marked mortgage revelry amongst banks with punitive regulation

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This entry was posted on October 21, 2010 by in Amitonomics, China, Emerging Markets, Global and tagged .

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