Is China set to drive inflation higher?

Cheap labour and goods from China have helped keep inflation across the world low in recent years. But China is now changing its focus from expanding capacity to improving profits, says Martin Spring in the On Target newsletter. Global consumers may find that the cheap goods they've been taking for granted are no longer available - and that means higher inflation.

The Chinese government is embarking on a new course for the nation's economy that is going to catch the unwary by surprise, says consultant Simon Hunt of the eponymous Simon Hunt Strategic Services, in a recent report I've had forwarded to me by a reader.

Past policies drove industrialization at any cost, with key input prices such as land and utility services kept low, and cheap "effectively zero cost" - capital channelled to large enterprises. "What followed was the world's largest-ever fixed asset investment binge." Result: serious over-capacity, bloated inventories and paper-thin profit margins.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free
https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up
MoneyWeek

MoneyWeek is written by a team of experienced and award-winning journalists, plus expert columnists. As well as daily digital news and features, MoneyWeek also publishes a weekly magazine, covering investing and personal finance. From share tips, pensions, gold to practical investment tips - we provide a round-up to help you make money and keep it.