Where is the demand?

No doubt that Chinaman have become the most powerful creature in the world to support the economy. Not only they give a huge support in the C (consumption) but also the I (investment) in the component of GDP (expenditure approach) world widely. To generalize a bit, Chinaman hold a huge portion in the worldwide demand theoretically.

How about in reality? Do Chinaman really hold a huge portion of demand world widely?

In my point of view, Chinaman do hold a huge portion of demand but in a unequally distributed way. What I mean in here is that China government has the power to manipulate the demand distribution. It can easily manipulate the demand power through its emigration policy. By allowing more Chinaman to consume and invest in a place, China government can easily manipulate the demand distribution. In fact, geographical factors also affect the demand distribution. If that place is too tough or too far to reach, even China government let go the emigration restriction; Chinaman would still hesitate about emigrating to that place. You may argue that immigration policy of other countries should also affect the demand distribution. Yet, I considered this effect to be so small since I assume that every country is try to maximize its own profit (try to capture the Chinaman demand power).

So what is the effect under this unevenly distributed demand power?

Pricing problem.

Back to the basic, think about the supply and demand curve. Assuming in equilibrium in the initial point / demand suddenly boost up due to Chinaman effect / Chinaman effect is sustainable, which mean not a temporary effect / sustainable increase in the demand curve / left shift in demand curve / price upward movement

Overall, what you get should be increase in price in that particular place.

Next?

In the LR, supply side will have to work out a bit / supply increase in the market / supply curve shift / price decline / quantity increase overall and price is constant (theoretically)

Add in worldwide factor?

1. Yuan will appreciation to USD

2. Yuan will appreciate to HKD

Next?

1. Supply side cost increase (Producer cost increase due to FX movement)

2. Demand side keep on increasing (Demand curve stay constant)

3. Increase in demand is faster than increase in supply

4. Price keep on inclining

Finally?

1. Create a place like HK

2. C and I keep on increasing

3. Price keep on moving up

4. Local HK people keep on facing the currency depreciation effect

5. Demand keep on increasing but cost keep on increasing in the same time

6. To the extreme, local people gain nothing despite the Chinaman demand power

One Step Beyond?

Tell you next time

Thank you

Paul Ng