tag:blogger.com,1999:blog-6365320.post4180643159522536204..comments2007-09-28T23:40:20.353+08:00Fons Tuinstrahttp://www.blogger.com/profile/12661962166788808674fons.tuinstra@gmail.comBlogger2125tag:blogger.com,1999:blog-6365320.post-45219669647436915762007-09-28T23:40:00.000+08:002007-09-28T23:40:00.000+08:00I agree with your argument, Chris.<BR/>The problem in China is of course that logics often does not get very far. Provincial and local are looking after their own interests, and even when it would make sense from a macro-perspective to increase prices now, the central government is most likely not getting away with it.Fons Tuinstrahttp://www.blogger.com/profile/12661962166788808674noreply@blogger.comtag:blogger.com,1999:blog-6365320.post-38976373471037892602007-09-28T23:34:00.000+08:002007-09-28T23:34:00.000+08:00The energy-price factor is also what brought down Suharto in Indonesia. Both that and the current crisis in Burma are happening during severe economic downturns,<BR/><BR/>China could really get ahead of this issue now while it is in a comfy high-growth period. It could free energy prices (which are high but dollar-denominated) while letting the RMB appreciate to a more realistic level. That would cancel inflationary pain domestically and protectionist sentiment in the US. Reserves are flush, liquidity is ample, and the pain on margins from the 8% appreciation vs the USD hasn't hurt margins in any way. if the CCP ignores this opportunity for reform it could very well bite them on the ass later (or sooner).<BR/><BR/>Yes, I've been saying that for several years now, but the bears do get proven correct on the down side of the business cycle. <BR/><BR/>The laws of economics do apply to China, but unlike those of gravity they aren't always immediate.Myrickhttp://www.asiapundit.comnoreply@blogger.com