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Roubini on China
The Chinese economy has been a strange animal altogether for the past decade. As Alan Greenspan pointed out, cheap manufacturing in the early 2000's has put a deflationary pressure on the rest of the world, resulting in central banks targeting wrongly low interest rates. This all resulted in what we know as the real estate bubble in the US. Looking backwards is always easy, but today what we see is a strong inflationary pressure in China (and not only China by the way). Not only wage increases are now driving up prices in China, commodity prices are spiking again, resulting in some serious strains in China. Unilever was recently asked by the government not to increase the prices of its products after a panic followed the price increase announcement. This has been predicted and observed since a while now, But here is the interesting view from Nouriel Roubini: No country can be productive enough to take 50% of GDP and reinvest it into new capital stock without eventually facing massive overcapacity and a
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