Shown the Money
April 23rd, 2010
Three new high rises are set to be built next to the two whose shells sit expectantly next door to my Suzhou flat. The last two apartment buildings went up a floor a week, to finish a year ahead of my expectations. I expect the next three to go up just as rapidly. BMWs and Mercedes seem to be breeding in the area (all of it in-breeding), while expensive boutiques and beauty spas abound – many of which still seem empty of the volumes of customers they need to realize a return on investment. Stories abound in South China of Chinese customers walking into mega-stores with suitcases of cash to buy flat screen TV’s so large they have to have the rooms built around them to be watched.
These are China’s glory days, when cash is sloshing around the economy at levels unprecedented in the country’s modern history. And inflows are not about to slow down, according to Arvind Subramanian, senior fellow at the Peterson Institute for International Economics and Centre for Global Development. Instead, he explains in the Financial Times, the West’s anemic recovery and the relatively rigid financial controls and narrow band of currency valuations will see yet more cash flow into Asian economies as investors bet that Asian governments – especially China’s – will have to re-valuate their currencies and loosen financial controls to keep yet more and larger bubbles from inflating prices in their economies. Subramanian suggests the Asian countries coordinate their fiscal policies to keep speculation from bulging out one economy or another, potentially destabilizing the region in other, unexpected ways. China, especially, can take up leadership in this respect in the region to coordinate economic policies.
But then again, the few watching life on those newly purchased mega-screens may find down-sizing to accommodate the masses unbearable. Tune in for the next episode.
Related posts:
If it Looks Like a Bubble and It Smells Like a Bubble …
A Look Under the Hood at China’s Economic Engine
