Would anyone be able to explain why inflation in China may have more advantages than disadvantages? Don't have my APT/Extracts on me, but I'm sure it said somewhere about this.
I don't see how there are more PRO's - China relies on low labour costs etc. to attract FDI, so surely a rise in inflation -> wage price spiral -> higher LC -> less competitive abroad is not what China want?
Also, is it right to say China have a comparative advantage in cheap labour? Would it be wrong to say they have a comparative advantage in Rare earths too - because 'rare earths' aren't actually rare and can therefore be extracted by other countries. It's only the efficiency of the extraction which prevents countries from mining their own.
Cheers