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China’s Economic ‘Sugar High’ Could Amplify US Inflation

In July, China experienced an unexpected slowdown in factory output, which has led to concerns about its implications for the US economy. Recent research suggests that Chinese policymakers are making efforts to boost their economy by encouraging investments in the manufacturing sector, which could potentially lead to an increase in inflation in the US.

To bolster their manufacturing sector, Chinese policymakers have implemented changes in credit allocation. Bank lending is now shifting away from the property sector and towards manufacturing, resulting in a significant increase in new “green loans” as China’s clean energy sector grows. Experts estimate that new manufacturing lending will make up a considerable portion of total lending in the near future.

If these investments in manufacturing are successful and credit growth in China rises to 12% over the next two years, it could impact prices in the US. The increased demand from a manufacturing boom in China would lead to higher costs for producers, which would eventually be passed on to consumers. This scenario could result in a sustained increase in inflation in the US over the next two years.

However, conventional wisdom may not hold true when it comes to China’s manufacturing-led expansion and its effects on global commodity markets and supply chains. As China continues to see growth

By Samantha Jones

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