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Has Chinese Premier Wen Jiabao given risk markets a big green light? Writing in the FT, he says...
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Friday, June 24, 2011, 12:37 AM ETHas Chinese Premier Wen Jiabao given risk markets a big green light? Writing in the FT, he says China's battle against inflation has worked, with price levels expected to "drop steadily" from here. A key market worry - tight money and a slowdown in China - may have just been lifted. Asian markets and commodities are up sharply. Non-paywall summary here.
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All well and good, but the fact remains, growth is slowing as a consequence of the debt overhang.
For what it's worth, I don't see much evidence that the battle against inflation has been won.
This announcement, coupled with the oil release should move the market up till the end of the month. They had to do something, or the "end of QE2" could make too much money head for the exits.
Famous last words?
China's rapid growth is largely coming from irresponsible lending, so it's not clear to me how "its rapid development" can come without inflation. Once the lending spree ends, there are going to be massive deflationary pressures, as a result of money being destroyed in poorly thought out investments. The only way inflation keeps up if there's another round of ill-advised lending.