What can derail the China growth story?

March 26th, 2008

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Recently, news of fuel shortages in China has been hitting the news wire again- see China Facing Renewed Fuel Shortages from the Associated Press. In fact, this problem had been festering since last year November, when we wrote Result of Chinese price controls.

If this fuel shortage problem continues to worsen in the months ahead, will it eventually result in a major correction in the Chinese economy? As we put forth this question before in Can China really ?de-couple? from a US recession?,

Does China have enough capital goods, labour (yes, there are reports of labour shortages in China) and raw materials to continue the current trajectory of capital investment growth in China?

With such high oil prices and rampaging inflation in China, this is a worry that cannot be ignored. Keep watch on the Chinese fuel situation.

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