The Chinese investment story has played an important part in the demand for investments in Emerging Market economies in recent years.
New commentary from Standard Life Investments suggests that the Chinese investment party could soon be over.
They are predicting that inflationary pressures in China will create difficult decisions for policy makers inside and outside the country.
Because China is likely to remain a fast growing economy, Standard Life Investments believes that the composition of this economic growth has not yet been determined. This could create risks and opportunities for investors.
They argue that investors have become too worried about short-term issues, such as food prices affecting headline inflation. Instead, they argue that the rapid pace of money supply and wages growth are bigger issues to address in the medium-term.
These medium-term issues could have a big impact on monetary policy both in China and for Western economies. The fear is that we are seeing the start of a trend for exported inflation; something that Western Central Banks would have real trouble bringing under control.
We will look closely at these views from Standard Life Investments when we run our next scheduled Investment Committee meeting at the start of April.
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