This, together with other factors within the producer price index, has led to inflation rising significantly in most emerging countries for the time being in its transitory components, but signs of important traces can also be seen in some cyclical components, which are usually at least to some degree permanent.
Looking at recent events in China, the affair in Evergrande it is much more important than what the markets have discounted up to this point, rather it seems like a snowball that will fall on a greater number of Chinese developers and with this there can also be a domino effect on the exposed banking sector, especially in Taiwan, Hong Kong, England, the United States and Australia. For this reason, it is not yet time to buy the floor in the Chinese stock market.
More than 70% of the savings of the Chinese population has been forcibly directed towards housing, with a large percentage of Chinese investors even owning two, three or more houses. Part of this is due to draconian regulation for investing abroad, the high volatility of the Shanghai Stock Exchange, and China’s poor social security system.
These facts contextualize how serious a real estate debacle would be for the largest economy in the East. Until today there has been no contagion in the sector of high yields global, of the significant increase in the spread that has happened in China in this asset class, but it is not ruled out that the correlation that the two have carried until 2020 for 10 years of almost 90% will end up being respected and if contagion is observed.
In the United States, we could be entering – considering all the evidence of the economic variables – the last stage of this expansion and contrary to recent fears, analysts do not expect stagflation, on the contrary, the economy seems to be very well positioned to withstand inflation for the following reasons: inequity has made the rich spend less, even though they have been the ones who received the most aid.
Globalization continues to push prices down, there are no pressures from the labor supply side either. Oil weighs less and less on costs. Infrastructure spending will be smaller than expected and, finally, everyone talks about inflation, which is no longer so scary.