China Has a Problem

Here are two facts about China:

Their economic growth has slowed a bit, but it is still really high at 9.7, at least by the official numbers.  Still, China’s leaders have a problem.  Inflation can eventually create disastrous problems, but eliminating it would require raising the Renminbi, which would slow exports and economic growth.

The real estate problem is just a miss-allocation of assets, and has to work itself out, just as it is doing here.  Not much they can do about that.

China needs to maintain rapid economic growth to manage the migration from rural to urban areas that accompanies its becoming a modern economy.  Slow growth would lead to increased unemployment and political instability, and they don’t handle political instability well in China.

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