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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: ild who wrote (27593)3/2/2005 11:01:21 AM
From: russwinter  Read Replies (1) of 110194
 
Andy Xie is at least addressing a key issue, but his argument to me seems circular (*). It's not just Chinese consumers who are driving commodity prices, it's also Chinese business and industrial demand,(feeding their export market and internal growth). Again no one really addresses the profitability aspect of this. A measure of Chinese consumer demand, example TVs, phones and appliances are fairly basic (not speculative), almost in the subsistence category (as is "better" food). Higher value items such as autos and PC might be more speculative or tied to China's property Bubble.
earth-policy.org

Therefore I would rephrase this "Chinese consumers are just not becoming rich fast enough to catch up with the rapid increase in commodity prices", by adding "Chinese enterprises are not raising prices fast enough to it's markets" to the equation.

(*)
The justification for high commodity prices is based on the same illusion. The prices that China can afford depend on wage levels more than the overall size of the economy. The Chinese economy has been expanding rapidly on employment rather than wage growth. In the end, the burden for bearing the costs of raw materials comes down to the income of each consumer. Chinese consumers are just not becoming rich fast enough to catch up with the rapid increase in commodity prices. However, the impact of high raw material prices has so far been covered up by a property bubble.
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