Thursday, November 11, 2010
China's stimulus spending causes inflation. Has China government lost control on there economy?
China made a 2009 stimulus program spending over 1.1 trillion dollars to combat the possibility of a financial crisis. Which many government officials feared in 2008 and 2009 as banks in the China loaned over 10 trillion dollars fueling economy growth. The government wanted to see banks pull back on lending and they hoped the stimulus who help do just that But with many banks already exceeded projections 2010 loaning many government officials worst fear has arrived and that is a growing inflation rate . Over the next year it is clear that that inflation will be a major concern of government officials and they will try to take steps to lower inflation and regain control of the economy.
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It's interesting that China was quick to criticize the US for another round of quantitative easing planned by the FED, yet they seem to be willing to take similar paths to recovery. The 'back and forth' moves between China and the US regarding trade has become a bit volatile... I wonder if the G20 will alleviate some of the tension.
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