Executive Insight – Welcoming Chinese inflation

The spectacular rebound of emerging markets after the recent recession was driven in no small part by China’s emergency stimulus package in late 2008, arguably the timeliest and the largest in the world (relative to gross domestic product). The pull of Chinese demand was powerful enough to revitalize international trade — severely curtailed by the crunch in trade finance — and to drag out of the hole many of the economies well integrated in the Chinese supply chain, from Malaysia to Korea, and Australia to Germany. The flip side of this stimulus has been a worrisome boom in real estate prices (which has led many to scream “Bubble!”) and persistent inflationary pressures which have extended across Asia (excluding Japan),complicating the macro picture at the national and global level. Asian central banks (and also Latin American ones) until late last year were reluctant to aggressively raise interest rates, lest they clip