China Tells

According to a report released by European Union Chamber of Commerce, China’s over capacity of production encouraged by the domestic stimulus program could bring more conflicts in international trade and drive down profit margin worldwide (See ARticle from WSJ). China’s production of Steel, Aluminum, and Cement had a record year of growth in 2009 thanks to domestic recovery. However, worry emerges from foreign countries that such a production boost might result in an over capacity of supply and flood the world market with cheap products. After all, Chinese producers need to find market through export with their increased capacity. Such a trend could cause collision between major trading partners in the international community. Another implication is that due to such excessive capacity, it is hard to imagine inflation to come. In fact, with producer’s profit margin squeezed, price is unlikely to go up and deflation seems a more likely scenario.

中国重型工业和冶炼企业最近的产能增加给一些国际贸易伙伴带来忧患。他们担心由于中国产能扩张太快，导致过剩产能可能不得不被挤到出口市场，这样国际市场将充斥便宜的中国货，可能引起更多的贸易冲突。同时由于中国的产能过剩，企业的利润率受到影响，很难看到价格上涨的希望，因此通缩的可能性好像要高过通胀。