Industrial Insight

China inflation is ours… | June 7, 2011

China Inflation: The Canary In the Coalmine

John Rutledge, 06.06.11, 06:00 PM EDT

The real inflation story is here in the United States.

http://www.forbes.com/2011/06/06/china-inflation-dollar.html

China’s most recent inflation figure, 5.3%, is a very big deal in China. In Chinese history, periods of high inflation are associated with social, economic, and political unrest, something China’s leaders do not want. In spite of their extraordinary growth record since Deng Xiao Ping opened China in 1978, China’s per-capita GDP is just $4,399 ($7,481 purchasing power adjusted), less than one-tenth of the $48,157 U.S. level. They need 30 to 50 years of uninterrupted high growth to bring Chinese living standards up to current developed country levels. That’s why their central bank, the People’s Bank of China, has raised reserve requirements for Chinese banks five times so far this year to more than 20% today and adopted a number of other policies to curb price increases, such as selling food from government stockpiles.

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