China’s Reopening Comes With a $720 Billion Inflation Bomb
In China, the reopening of the economy is coming at a time when its central bank is in easing mode – potentially making it all the more inflationary.
Bloomberg reported that although over the course of the pandemic, China hasn’t offered direct payments to citizens in the way the U.S. and much of the rest of the contemporary inflationary world did to help cope with lockdowns, Beijing has preferred to focus on corporate aid.
It’s perhaps a surprising strategy from what’s ostensibly a socialist country. China’s focus for decades has been on the supply side, aiding employers, so they can keep people at work, hoping to contribute to social stability and development.
While this may look good for China, economists at Nomura Holdings offer caution – and cause for concern. Poring over Chinese bank-account and income data, they calculated that Chinese households have indeed built up excess savings, to the tune of $720 billion.
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