Hopes on the Chinese consumer may be a stretch


American investors are flocking en masse to China as if it were the promised land of profits. But the Chinese consumer leaves much to be desired. Beyond the glitter and the small new Chinese upper class, the immense majority of Chinese consumers are struggling against inflation. Furthermore, the Chinese are culturally inclined to save rather than spend. It is almost in their DNA, a custom forged during decades of penury.

While expansion has dried up in the U.S. after the collapse of the American consumer, American capital is flowing into China, fueling the very inflation that is limiting the ability of the Chinese consumers to purchase things.

China has raised its interest rates several times to fight off inflation but the results have been marginal.