I wrote here recently that China was experiencing a nasty bout of inflation along with meteoric growth. China admits as much and is taking active steps to combat it. With a recently published inflation rate of 6.5% and certain food prices spiking (pork is up 55%), China is pledging to rein in export growth.
With all the focus on China, I was interested to see Dr. Enzio von Pfeil on CNBC discussing Chinese inflation. While I don't have access to the video, you can read about the interview on Enzio's own blog, Enzio's Clock.
Dr. von Pfeil's thesis is that food inflation, while spiking in China, is something beyond the purview of the Chinese Central Bank. Through monetary policy, central banks can affect only non-food inflation. Inflation in food prices comes from policy issues, weather, and rising global commodity prices -- not excess supply of money and excess demand for good.
Dr. von Pfeil doesn't think China is overheating, though he does caution waiting to step into the Chinese market until after the subprime mess has run its course in the U.S. and abroad. Good, sagacious advice.
As is frequently the case in quickly growing economies, it's hard to stay on the sidelines until after all overhangs have cleared. By then, a big chunk of the investment opportunity has passed the investor by. There are always significant risks in investing and returns provided have to be greater to compensate investors for assuming such risks. I like Dr. von Pfeil's analysis, and he's a much smarter investor than I am -- I'm just not sure how actionable this really is.
Zack Miller is the lead equity analyst for America Israel Investment Associates, LLC., the managing editor of IsraelNewsletter.com and a former equity analyst for a leading multinational hedge fund. Disclosure: I personally own shares in Chinese ETF, FXI.
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Reader Comments (Page 1 of 1)
11-25-2007 @ 3:33PM
Neuticles said...
China is fast approaching World Power status.
The Republican's can be credited for that.
11-28-2007 @ 9:35AM
Paul McCoy said...
Remember when "our" US government kept the Chinese government 2 1/2 generations behind us in technological information??? That was when it was OUR government and NOT the sole property of an elite aristocracy hell-bent on profits over OUR national security. Corporate America's greed has awaken a "sleeping giant" that fundamentally hates us and thereby they've committed acts of treason. Let them pay for the mess they've made by taxation. Let them send THEIR children to fight China when it rears up on its hind legs to crush us.
11-25-2007 @ 5:34PM
charles boardman said...
China has always had the potential with natural resources and manpower. I saw this when in China in WWII and on three subsequent trips since then. I said in 1945 to my Army driver,"Give these people 50 years under the right leadership and they will go out to conquer the world". Looks like they are doing it economically. Let us keep it friendly as long as we can. Remember General MacArthur's advice to not mess with China. It would be another "no win" situation for the USA.
11-26-2007 @ 3:39AM
michiganjames said...
China set its own clock backwards about 20-30 years with the Cultural revolution - no awakened by the Capitalist revolution - yes China has the manpower and the natural resources - which Japan wanted all to herself....
Interestingly, when the Japanese left southeast Asia at the end of WWII, they did not apologize or keep their mouth shut, what they said was "we'll be back in 50 years."
Too bad it takes a movie or something for people to learn about things like Unit 731 etc, etc.
11-26-2007 @ 3:08AM
michiganjames said...
China set its clock backwards about 20-30 years with the Cultural revolution - (correction) now awakened by the Capitalist revolution - yes China has the manpower and the natural resources - which Japan wanted all to herself.... the other Imperialist powers in the previous century...
11-26-2007 @ 3:40AM
michiganjames said...
To McCoy -
I don't think the Chinese people hate Americans; they erected their own version of the Statue of Liberty in Tianammen Sq in 1989. The government may distrust us for meddling into the affairs of Taiwan Strait and Tibet etc... The Hainan plane incident was not helpful for public relations.
But how would we like it if the Saudis, Iranian's or Iraqi's parked an aircraft carrier in the Gulf of Mexico? Or the Russians flew a spy / reconnaissance plane up and down our Atlantic coast?
11-28-2007 @ 10:00AM
Paul McCoy said...
Don't buy a car today, because what has happened to the price of homes will soon happen to the price of cars. The American Auto Industry did this to themselves with their "short term" thinking of cutting wages and their workforce in half to save money up front. They off-shored EVERYTHING and today the housing market is going bust; and soon will the auto industry. So, where's the American Auto Industry BIG GAIN now?!! They made a short term BIG profit, but they will soon suffer an even BIGGER long term disastrous loss.