tag:blogger.com,1999:blog-8554347448299984407.post1315343210505819555..comments2023-05-13T09:43:33.746+01:00Comments on Macronomics: Guest post - A Chinese "Déjà-vu"?Anonymoushttp://www.blogger.com/profile/16670415818064368635noreply@blogger.comBlogger1125tag:blogger.com,1999:blog-8554347448299984407.post-68170327538547618252014-12-20T15:55:02.461+00:002014-12-20T15:55:02.461+00:00Unlike the Tigers, China starts out with massive r...Unlike the Tigers, China starts out with massive reserves. It could keep its currency overvalued, hike domestic wages, and finance a current-account deterioration with reserves. The investment slump would be offset by higher consumption growth. China would need to run massive fiscal deficits to bail out (parts of) the banking system. <br /><br />The result: higher inflation, a sharp sectoral adjustment towards consumption, massive reserve disaccumulation, and perhaps a 3-4 year window to make the transition before reserves reach worrying levels. <br /><br />Flicking the wage switch would turn China into the source of wage inflation in the world. Corporate profits would deteriorate, even as some consumer goods exporters (and some commodities, including oil and gold) would benefit. Inequality would begin to fall as a result. <br /><br />A likely scenario? I'm not sure, but I do think they, unlike the Tigers, have the option to choose it. Diegohttps://www.blogger.com/profile/18084671738464414141noreply@blogger.com