About this Blog

The purpose of this blog is for my personal use. It serves as my personal diary as I investigate Chinese internet/gaming companies for investment purpose. If you have any comments or disagreement, please give me feedbacks.

Tuesday, September 30, 2008

China's Goldilocks Economy

Did China just achieved Goldilocks economy?

I am no economist. But two recent news make me wonder that China's economy had achieved (or is not its way to achieve) soft landing.

After bedeviled by high inflation, inflation in China had declined for 4 straight months.

After three straight months of declining manufacturing activities, the Purchasing Managers' Index just rose to a seasonally adjusted 51.2 in September from 48.4 in August.

Because of the global (near) recession, cost of the raw material decreased and that helps with China's inflation problem.

Because China has so much money (trade surpluses, etc.), it is able to invest (into infrastructure) its way out of any economy decline.

I think China is on her way to change from a export economy (like Japan) to a continental economy (like USA).

What do you guys think?


Anonymous said...

I don't think China can make the transition to a domestic demand driven economy yet. The US is domestically driven because US households spend and unlike Europe households rather than government directs much of the spending. Chinese households don't want to spend, just save.

Until you see household savings rates decline in China the country will still be dependent on exports. Right now though household savings China is going up. Inflation is going down because demand is declining reducing demand for raw materials. Plus the inflation number was distorted because of a short term shortage of pigs.

HenryC said...

Thanks for the comment.


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