Credit costs
Higher credit costs could add to many businesses woes as they would have to pay more on their loans. Some analysts also worry that it could stifle economic growth, leading to unemployment.
In Hong Kong, authorities have little room to tackle inflation. Bolland says Hong Kongs fixed exchange rate to the dollar makes Hong Kong assets cheaper to mainland Chinese buyers who hold an appreciating yuan. And that drives up the stock and property market. In some pockets of the property market, prices have surpassed their former peaks in 1997.
Of course with the liquidity in the system in the mainland, even though they are trying to tighten credit and bank lending and all that, theres a lot of cash that somehow manages to find its way to Hong Kong, said Bolland.
Positive effect
With every country in Asia struggling to contain rising prices, Sander at the World Bank says inflation has propelled energy efficiency and agricultural productivity higher on Asian governments agenda.
In the long term basically you tie this to increases in the productivity of agriculture where there are more people demanding more food, said Sander. You need to have the supply response and have agriculture produce more food and we think that there is a lot of potential for that. And number two, on the fuel situation. If you need less oil, increases in the price of oil will hurt you less.
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