Chinese Inflation

Chinese inflation affects the Global economy. I've previously covered the issue about the problem of inflation in China in Early February this year.

It was Wednesday last week that Prime Minister Wen Jiabao was talking about Chinese inflation declaring that: "The current price hikes and increasing inflationary pressures are the biggest concern of the people," Mr. Wen said. He said the government would try to cap inflation at 4.8 percent this year but added that “upward pressure on prices" would continue and that government officials must ensure that the country fends off "significant inflation." "Governments at all levels must give high priority to keeping prices stable because price stability has a direct bearing on the quality of people’s lives," he said, suggesting that more official intervention on pricing could occur this year.

This week, China's Bureau of Statistics shocked the economic world with consumer price index growth of 8.7 per cent for the year to February (In January it rose by 7.1%). That was the highest level of inflation since 1996, but even more disconcerting is a 23.3 percent jump in food prices last month, which caused the overall increase. Price rises for some individual goods were even more dramatic: Pork was up 63.4 percent and vegetables 46 percent. China's producer price index jumped 6.6 per cent in the year to February, from a virtual standing start in the middle of last year. The United States Bureau of Labor Statistics reports import prices from China fell by about 1.5 per cent annually from 2004 through to mid-last year. But the latest annual figures show China import prices rising 2.5 per cent. Chinese statistics show its export prices are up 6.5 per cent in a year in US dollars, the currency in which most China export deals are set. China is treading a similar path to Japan, Korea and Taiwan before it, albeit on a much larger scale.