Surging prices in China are threatening to spread to the rest of the world as increasing demand is pushing up food prices rather than temporary factors, according to The Daily Telegraph. Brian Coulton of Legal & General Investment Management warned that the historical trend of Chinese exports driving down global prices is shifting, and could threaten the country’s economic growth. Coulton said, “As inflation becomes more and more of a concern in advanced economies, China is going to be making things worse.”
Inflation in China is expected to have reached 5.5% in March, and could be followed by a tighter round of fiscal tightening than has been anticipated, according to Coulton. The economist warned that tightening efforts could pose a “rising risk to the country’s macroeconomic stability and of growth falling from the current 10% a year to 4% or 5%.” Coulton also said that the People’s Bank of China’s efforts to contain inflation by raising the reserve ratio for banks is not effective, arguing that it would only offset the country’s intervention to keep its currency weak.
