Remember when China was endangering the world economy by "exporting deflation"? It was only a few weeks ago.

Well, apparently the country is still causing trouble, at least according to the International Herald Tribune (and an attendant fog of economic chatter), although now it is "exporting inflation". What a difference the recent upturn in the US and Japanese economies has made. With recovery breaking out everywhere, some commentators seem to have decided: It's so good it must be bad.

The best way to cut through this nonsense is to ignore most of it. China's economic policies and performance have remained basically unchanged (on a positive reform-oriented and high-growth trajectory). In particular, the potentially disastrous advice to sharply increase the value of the Renminbi (which would have sent a real inflationary jolt into the global economy) has been sagely disdained.

"Deflation" was in any case mostly an excuse for economic stagnation in developed countries, resulting predominantly from structural rigidities and a failure to push through needed reforms. The only "deflation" China was ever exporting was counter-inflationary medicine, which is now being retrospectively appreciated. Everyone - except it seems economists - knows that low prices are "a good thing" directly contributing to general well-being.

There are nevertheless a number of interesting aspects to the new inflation panic.

Firstly, it demonstrates that China's arrival as a major global economic force is now largely complete, with perturbations in world markets being traced back to the "China-factor" almost immediately. In particular, the Chinese appetite for raw materials is definitely influencing an upward trend in commodities prices, to the advantage of producer countries - typically among the world's poorest.

In the case of oil prices, however, the soviet-era plans and political machinations of the OPEC cartel should take centre stage. The world is swimming in oil and increasing demand from China does not explain the current high prices. On the contrary, OPEC representatives have suggested they are trying to insulate oil prices against a possible downturn in Chinese demand (by choking-back supply). Some rather more suspicious analysts also suggest that attempts to influence the upcoming US presidential election are a factor, in which case oil consumers will be paying an "anyone but Bush" premium until November.

Secondly, China's counter-inflationary contribution to the world economy should be clearly seen for what it is, and celebrated. The efficiency of Chinese manufacturers plays a fundamental role in sustaining growth worldwide by sidelining the threat of inflation. China's economic emergence is thus proving to be a win-win opportunity for other countries to push ahead with reforms, hold down interest rates, raise growth-rates and thus stimulate overall demand. This is especially evident in the US, with both the long Clinton-boom and the comparative mildness of the recent "slump" attesting to this effect.

Finally the recent turn-about in opinion should put an end to irresponsible political pressure on the Renminbi. Keeping Chinese manufacturers competitive on world markets is in everyone's interest - after all, we wouldn't want the country to begin "exporting inflation" would we?

starcomment@yahoo.com