Dim sums for China

| Richard Adams | guardian.co.uk

What Gordon Brown and Barack Obama wouldn't give to have a piece of the action that China's economy is enjoying: the latest quarterly figures show a spectacular 11.9% expansion in its GDP, retail sales up 17.9% in March from the year before, industrial production expanded by 18% and consumer price inflation running at just 2.4%. Global economic crisis, what global economic crisis?

But here's another statistic: China's urban property price index rose by an extraordinary 11.7% in March, its fastest increase in five years. Property investment was up 35% annually, making it easily the biggest contributor to those spectacular economic growth figures. As has been pointed out, this leap comes after concerted efforts by the government to cool down the housing market by restricting lending. It doesn't seem to be working. Talk about a Chinese property bubble will only get more credible – and China's authorities seem nervous, having just this week announced new measures to curb speculative buying by raising the minimum down-payment for purchases of second homes from 40% to 50%.

The fear is that we've seen this movie before and we know how it ends: strong growth, export bonanza, low exchange or interest rates, a property bubble ... what could possibly go wrong? If you think things are different this time, then I have some condos in Florida, a bank in Iceland and a hotel in Dubai that might interest you for investment purposes. Unfortunately, because local and central government in China benefits so directly from property deals, there's a very strong incentive for them to keep the bubble expanding – which is exactly what has happened.

But that's for the longer run. In the short run the international question is: what happens to China's currency against the US dollar? The single biggest issue between China and the US is the rate at which the yuan has been stuck against the dollar since 2008, with Washington lobbying hard for China to let its currency appreciate in value. Economic growth of this magnitude removes any argument China might have had for keeping the yuan weak to avoid the after-effects of the global economic meltdown. And really, there seems little macroeconomic reason to do otherwise: a stronger yuan would help keep domestic inflation and make imports cheaper. In any case, China's authorities can easily let both domestic interest rates and the yuan rise. And in a few month's time they probably will.

A weaker dollar may not be the panacea that US politicians think it would be. US exports to China are already pretty healthy. The breathtaking capture of the US manufactured goods sector by China's exporters – the challenge in any branch of WalMart or Target is to find a non-food item on sale that is not made in China – means a stronger yuan and weaker dollar equals more expensive imports for US consumers. All those shiny iPads may be designed in California but they are made (or their components are) in China. More seriously, plenty of quotidian consumer staples, such as children's clothes, come from China. America's leaders should be careful what they wish for.