CHINA’S ECONOMY:ENTERING TROUBLED WATERS?
Oscar Monterroso Chief EconomistCentral Bank of Guatemala May 9, 2008
China´s Rapid Growth Finally Ignites Overheating?
Source: Global Insight
China´s Liquidity Growth Remains High Despite Rate Hikes
Source: Global Insight
Excess Liquidity Has Not Yet Pressured CPI Inflation …
Source: Global Insight
… But Has Inflated the Asset Markets
Source: Global Insight
Price Control Has Kept China´s Domestic Energy Prices Long Under International Prices
Source: Global Insight and Bloomberg
Exports to U.S. Main Drag on Recent Chinese Export Growth
Source: Global Insight
Chinese Export Outlook Depends on Whether the U.S. Will Drag the Global Economy
Source: International Monetary Fund
U.S. Recession Impactful on Chinese Exports
Source: Consensus Forecast
Economy could get squeezed domestically and externally. Monetary policy tightening has started Exports to the U.S. already slowing
Policy dilemma – exports and investment/inflation in different phases of cycle and require countering policies.
Without inflation risk, Beijing is willing to continue loose monetary policy to cushion the impact of sliding exports.
Inflation is key!
Conclusion
May, 2008