Too much stimulus in the U.S. may bring ‘imported inflation’ to China, economists warn
As the U.S. pumps trillions of dollars into its economy in the wake of the coronavirus pandemic, economists are concerned about spillover effects in China, including the risk of “imported inflation.”
Worries about high inflation, or rapidly rising prices, hit U.S. markets last week. The U.S. Congress is reviewing a $1.9 trillion stimulus plan that critics say could cause inflation to soar, and add to debt levels that rose following last year’s historic $2 trillion stimulus package.
In China, economists are wary of risks to growth as the country tries to recover fully from the shock of the pandemic.
Such a decline in the greenback would affect the security of China’s foreign exchange reserves, making efforts to increase international use of the yuan more important, the authors said.
As for near-term inflation concerns, analysts are watching the surge in prices for many commodities, of which China is the world’s largest consumer. Last month, copper prices rose to their highest since 2011. These price increases would raise production costs in China.
But analysts like Ma Yan, who covers foreign exchange at Hangzhou-based brokerage Nanhua Futures, expect the impact from such imported inflation will ultimately not be that great.
Instead, Ma is more concerned about how China can control its housing bubble, and is monitoring the credit and liquidity risk of real estate companies.
Reference: CNBC
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