Please elaborate.

Post #153,020 by Another Scott 4/29/04 12:10:09 AM Reply	Please elaborate. I assume you're referring to a story like [link\|http://biz.thestar.com.my/news/story.asp?file=/2004/4/24/business/7836357&sec=business\|this] from The Star in Malaysia: BEIJING: China plans to remove ceilings on bank lending rates to help curb investment and make interest rates more market-driven, state media said yesterday, quoting a senior central bank official. Speculation has mounted in recent weeks that China may raise benchmark lending rates to clamp down on the lending that is fuelling a ferocious industrial expansion that has worried top policymakers. China has to tread carefully. They need reasonably rapid growth to keep up with their population's needs, but their banks have made a lot of bad loans and poor investment decisions, so a banking crisis isn't out of the question. ~ 10% GDP growth isn't sustainable for any economy for a significant period of time - at least not based on history. How does this negatively affect the US? Could you elaborate? Thanks. Cheers, Scott.
Post #153,024 by gdaustin 4/29/04 12:40:23 AM 4/29/04 12:46:55 AM Reply	This One from Yahoo [link\|http://biz.yahoo.com/rf/040428/markets_usa_1.html\|China Wants To Slow Economy] Prices of precious metals like gold and silver, as well as industrial metals like aluminum and copper plunged along with soybeans and cotton, after China's Premier Wen Jiabao told Reuters the country may take forceful action to slow down its economy. A government plan to rein in inflation probably would limit money available for steel, cement and aluminum projects. We need inflation in China's economy to elevate wages relative to the U.S. We need a strong Yuan and a weak dollar to help drive exports. We've got to start working on the balance of trade. We need tariffs and protectionism, or to simply require balance of trade between the U.S. and other countries. This is an overt attempt by the Chinese government to keep their people down, slow their economy down, and drive the dollar higher, so they can justify not buying American. And keep their population in low wages. They NEED inflation to raise the wages of their workers. In a capital economy, inflation is bad. In a labor economy, inflation is good. Glen Austin Edited by gdaustin April 29, 2004, 12:46:55 AM EDT Expand All History
Post #153,027 by Another Scott 4/29/04 1:10:42 AM Reply	Thanks. More details are in [link\|http://quote.bloomberg.com/apps/news?pid=10000006&sid=am2iq7nCACIQ&refer=home\|this] story from Bloomberg (the URL may change): China has already raised banks' reserve ratio, restricted lending to the steel, cement and aluminum industries and banned new construction projects to slow the economy and prevent inflation. Still, the second-largest economy in Asia grew at a faster-than-expected 9.7 percent in the first quarter with investment jumping 53 percent in the first two months, including a 173 percent increase in money invested in the steel industry. ``The other measures didn't work and it's too late for anything else,'' Andy Xie, the Hong Kong-based chief economist at Morgan Stanley Asia Ltd. ``The government wanted to use market- based measures to slow things down, because local banks, governments and property developers didn't care about the cost of capital. Now it has come down to quantity measures.'' It sounds like a desperation measure, not something to unfairly protect the Chinese economy. It looks like property, steel, cement and aluminum industries are especially overheated so they're the focus of the efforts. As long as the yuan is pegged to the dollar, and China's economy is strong, China will have some unfair currency advantages. An excessively inflationary Chinese economy is not good for the world or the US. (What is excessive is left as an exercise for the reader.) I don't think that inflation will necessarily reduce the wage differences between China and the US. (E.g. Mexico has had periods of high inflation but that hasn't made the real costs of Mexican labor higher.) I think you mean that real wages need to rise in China. That will probably happen over time as long as the Chinese economy continues to grow, if it grows faster than the rate of growth of the labor force. Some inflation is necessary in modern economies, but I wouldn't say it's "good" for a labor economy. Real wages on the whole will only increase if there's a shortage of labor, or if productivity improvements justify higher wages (unless I'm forgetting something). TANSTAAFL. :-) Cheers, Scott.
Post #153,175 by gdaustin 4/29/04 9:45:19 PM Reply	But, their economy is heating up... Because of worldwide demand for their cheap labor. That labor has to work somewhere, especially in a high-tech economy. For high-tech jobs, they need modern buildings and infrastructure. As the demand presses them, wages will rise relative to the rest of the world. However, if they artificially limit the amount of industrial expansion they are willing to "allow", then wages will not rise as fast and they can continue to offer cheap labor. But this labor will not have a place to work, conditions will continue to be bad. Based on all the hype I'm hearing, I refuse to believe that developers in China are building "speculatively", which is what gets economies in trouble. Demand for U.S. office and warehouse space was dropping in 2000-2003 and is up only modestly, but our developers here are still building like crazy because of low capital costs. We need some inflation to slow down our building. But, Scott, maybe you're right on the labor. Maybe we need a major conflict or plague to kill off a few million people so that labor is back in demand again. Otherwise, we all just get a little cheaper every year. Glen Austin
Post #153,026 by gdaustin 4/29/04 12:49:45 AM Reply	And Another [link\|http://biz.yahoo.com/rf/040429/economy_china_lending_1.html\|China to Halt Small Bank Lending]

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