How to Play The Gap Between Chinese and U.S. Interest Rate Policy

Inflation at the core of divergent policies

   

The U.S. and China are the world’s two largest economies. So when they pursue radically different policies towards setting interest rates, investors should expect threats and opportunities.

At the core of the different interest rate policies is a fundamentally different concept of inflation and how to control it.  The U.S. ignores inflation that pains consumers – such as rising food and energy prices – and fears most deeply the inflation that cuts into corporate profits via rising wages.  By contrast, Chinese leaders fear consumer