China’s Inflation Canary In The Coal Mine

Inflation is only magnified by the increased cost of commodities including crude, which may be outstripping global supply.

The most critical problem China faces is not inflation per se; it is whether the cost of this inflation can be passed on to its trade partners in the form of more expensive goods. US and EU nations may not be willing to accept higher priced imports just as their economies are recovering from the recession. That, in turn, could cause China to hold its yuan peg to keep the prices of its exports artificially low. The higher cost of manufacturing goods will also make it harder for Chinese companies to attempt to “dump” low-priced products on to global market to reduce supply.

247Wallst.com