China To Export Inflation To The Global Economy

“China is about the export inflation to the rest of the world in a process that will resemble the fall of three dominos, one of which is already fallen, according to Societe Generale.

In a massive report titled “The China Domino has Fallen!” Soc Gen analysts outline the three dominos of the Chinese inflation export scheme, and their current progress.

• Domestic inflation: China switch to a consumer driven economy means more domestic demand. Supply remains constant, so prices rise. This is already happening.

• China exports inflation: “This dynamic seems as inevitable as gravity itself.” Chinese demand for oil and steel has pushed prices up in those markets. Now it is effecting commodities like cotton and food products. That’s being passed on to developed markets like the U.S., and it will really hit home in 2012. This is in the process of happening.

• China demand shock: The country’s long-term economic rebalancing results in an permanent increase in global demand. Supply is sticky, and it will take time for it to catch up, thus limiting the world’s ability to cope with this rise in demand. This is starting to happen.

If this didn’t sound alarming, their conclusion on how this resembles the reverse of China’s entry into the WTO should.

From Societe Generale:….”

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