As China tries to deflate world concern over uprisings in Tibet and nearby provinces, Beijing is trying to stem inflation and calm investors. Stock prices fell sharply on Tuesday over fears of the effects in Asia of an American economic slow down. Prime Minister Wen Jiabao also announced earlier in the day that inflation in 2008 would most likely exceed the government’s previous expectations. From the NYT:
The Tuesday stock sell-off is part of a wave of troubling economic and political news that appears to be striking this country at a time when Beijing is preparing to hold the Olympic Games and to celebrate the 30th anniversary of the beginning of its market-oriented economic reforms.
While the Chinese economy is still sizzling and investment continues to pour into the country, analysts are beginning to worry that if rising inflation does not dent Chinese growth, then weakening demand in the United States for Chinese-made goods will.
“If the U.S. is falling into recession, and we think it is, it will mean downside pressure on exports from China, and on economic growth,” says Huang Yiping, the chief Asia economist at Citigroup. “This could be a bigger threat than inflation.”
