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Last updated at: (Beijing Time) Wednesday, December 25, 2002

China Not to Blame for Deflation in US and Japan

Stephen Roach, chief economist with Morgan Stanley released a survey report lately, pointing out that in the world's economic predicament, China's economy is the hugest opportunity for world development, not the root-cause leading to the deflation in the United States and Japan.


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Stephen Roach, chief economist with Morgan Stanley released a survey report lately, pointing out that in the world's economic predicament, China's economy is the hugest opportunity for world development, not the root-cause leading to the deflation in the United States and Japan.

Recently, some Japanese spread repeatedly that the deflation in Japan was originated in China. An official with the Japanese Ministry of Finance even asserted openly that the root cause of his country's deflation lies in its neighboring countries, China in particular.

However, Mr. Roach held that since China's import from Japan constitutes less than 2 percent of the GDP of the latter and it does not sound reasonable that China triggered off the inherent deflation in Japan. As a matter of fact, it stemmed from the surplus of domestic supply and indulgent assistance given by the Japanese government to those low-effective and slack enterprises. Shifting to China with low costs but high effectiveness just proves the lasting surplus in Japan's productive forces with exorbitant costs.

Pinpointing similar views that China aggravates the peril of deflation in the United States, Mr. Roach noted such a saying is quite farfetched. Currently China's import only accounts for 10 percent of the U.S. total volume of commodity import and 1 percent of the country's GDP, which falls far short of taking effect on the overall price level in the United States.

Mr. Roach stressed that the upward trend of import of the United States should not be ascribed to China, but is caused by the low rate of interests, a vulnerable spot in the U.S. economy.

By PD Online Staff Zhu Lizhen


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