Chart of the Day: Strong China Growth, Inflation

The chart says it all . . .

China: Strong Growth, Rising Inflation Put Monetary Officials In A Corner



Update: April 24, 2007: 1:23 pm

And I believe their inflation data much even less than I believe the BLS stuff . . .


China: Strong Growth, Rising Inflation Put Monetary Officials In A Corner
James Pressler
Northern Trust

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What's been said:

Discussions found on the web:
  1. John commented on Apr 24

    The page cannot be found

    The page you are looking for might have been removed, had its name changed, or is temporarily unavailable.


    Go here:

    Select Global Economic Research

    then Daily Global Commentary

    then April 19, 2007

  2. Eddie commented on Apr 24

    Inflation reported as just over 3%? Where’s the outcry about cooked numbers? All reports I read say that their actual inflation is much higher than that.

  3. johntron commented on Apr 24

    For China bulls and bears…will C hit the top-tick with its stake in LFC?

  4. lloyd commented on Apr 24

    Anyone looking to buy puts on FXI? I’m trying to get my head around the idea of buying deep out of the money June/Aug puts. The chinese market feels like the Nasdaq ’00 all over again.

    My gut has been telling for years that 2008 will be the end of the near-term China party. Once Olympics related spending stops, the pain train will enter the station.

  5. John commented on Apr 24

    Thanks, Barry.

    For anyone else wanting to see the chart in context, I’ll point out that it’s the April 19th entry, not today’s.

  6. johntron commented on Apr 24

    FWIW, off topic….one thing to remember with the FXI is that its methodology differs from the .SSEC.

    The FXI tracks HK-“red chips” while .SSEC is for mainland-listed shares. Many companies have big discrepancies in valuation between HK/Shanghai-listed shares. A drop in .SSEC may not necessarily mean a drop in FXI.

    Theoretically as an arbitrage, you’d want to be short .SSEC and long FXI and watch the spread collapse a la COMS-PALM c. 2000.

    There may be some funds building positions in such a trade…..but I don’t know anything about the mechanics of the Chinese exchanges….it may be difficult/impossible for foreigners to short the market.

  7. Sri commented on Apr 24

    Can any one believe those stats from chineese govt.? From that chart you could see they had a growth of 9.5%+ with inflation of just 0.75%.

    What a joke?

  8. Peterpaul commented on Apr 24

    I can attest that inflation is far higher in China then the figures let on…

    Inflation in housing, oil, college education, and transportation costs (subway tickets) has gone through the roof in the last few years. One used to be able to buy a good apartment in Shanghai for about 5000 rmb per square meter. When I left in August 2006 the same apartment would be 12,000 a square meter – and friends say it has gone up!

    On the other hand, cars, shoes, and other consumer items keep dropping through the basement. New VWs have dropped in half in the last few years.

    I am not sure how the Chinese gov. weighs the basket of goods that go into the inflation figure, but I can assure you that inflation is present and nastier than the figures illustrate.

  9. lloyd commented on Apr 24

    Thanks Johntron…good point on the different type of shares.

    No way you can trust the Chinese figures. Heck, you can’t even trust the US gov’t stats and China is encouraged to fudge the numbers to keep the money coming in. I would imagine they’ll have to use the currency reserves to some large degree once its banking system blows up like Asia did in the late ’90s. They’re going to need that cash.

  10. REW commented on Apr 24

    That chart is downright dangerous in my opinion. Any time you see growth and inflation on the same chart, the easy but incorrect assumtion to draw is the two are tightly correlated. China does have inflation, and I agree with BR that it is probably much higher than the Chinese CPI shows. This is partly because CPI (in China or anywhere) is a lousy measure of inflation. But China’s inflation is not growth driven, it is currency driven. Until recently, Chinese monetary policy was set by our Fed, because the Yuan was pegged to our dollar. The Yuan remains tightly tied to the USD despite the gradual delinking currently in process. The Chinese inflation is really just our inflation. It shows up with greater venom in China because their economy is smaller and less diverse than ours.

  11. John commented on Apr 24


    Didn’t you get Bernanke’s memo? There is no inflation in America, (ex all the inflationary items). And the idea that inflation is nothing more than a money supply growing faster than its underlying economy is quaint and old-fashioned; only doo-doo heads believe in such rot. Why, if I cut my pizza into twice as many slices, I have twice as much pizza! Just ask the nice folks over at Goldman Sachs, or Bear Stearns. They’re having a pizza party of mythic proportions as we speak.

    Nothing to see here, people. Buy the dip and move along…

  12. Si commented on Apr 24

    And despite talking a good game (for him) at the first whiff of real slowing in US rates will be dropped, BB knows what his pay masters demand, f*%$ inflation.
    By the end of this, unless your mega rich, we’ll all be living in a shoe box and eating raw potatoes……but not to worry your flat screen TV was pretty damn cheap. The dollar is the tell.

  13. V L commented on Apr 25

    Chinese have been exporting their inflation to the US (the prices of Chinese exports have been gradually increasing over the last 12 months).
    The Fed has printed too much money and continues spreading their “inflation has been well contained” B.S.
    The dollar is in free fall and the Fed continues printing money day and night nonstop.
    Now when Americans travel to Europe, they need to bring peanut butter sandwiches with them because they cannot afford to buy food in Europe.
    Thanks a lot Ben for destroying US dollar purchasing power.

  14. cm commented on Apr 25

    V L: But in partial compensation for this, the “Europeans” cannot afford to fight as many wars as the “Americans”.

  15. Lucky8 commented on Apr 25

    How do you think a country lowers the value of their currency? The peg is not some magical thing the Chinese control, it is directly tied to the money supply. The peg sets the yuan to a low level, so of course Chinese scramble to get overvalued (to a Chinese consumer) dollars that he can use to buy lots more yuan. It is difficult to maintain an overvalued peg, but an undervalued peg will naturally adjust given enough time.

    Notice how inflation rose 2% in the last 6 months? Is it going to clear 5% before the end of the year?

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