Enzio von Pfeil

China Will Act to Prevent Economic Overheating

Investors need to exercise caution when reading such headlines. Having studied under von Hayek, I often am more intrigued by the assumptions underlying the statement than the statement per se.

Here: "China will act to prevent overheating". This assumes that "China: can prevent overheating. And I dispute that "it" has this power. For one thing, Beijing is losing control over it provinces. That is because, secondly, everyone is growth-obsessed in the runup to the 17th Party Congress, a theme we are discussing widely with our investor clients. Thirdly, China really does have the tools to prevent overheating. Finally, I am perplexed: last year we talked about profitless growth due to massive capacity expansion; how all of that supply has shrivelled and we are facing inflationary pressures?