Monday, November 12, 2007

China's Inflation Problem

Inflation in China Rebounded in October
The October rise in the CPI matches the 6.5% growth in August, which was the highest rate since 1996. It comes after inflation eased somewhat to 6.2% in September.

High inflation also erodes the value of people's savings, especially since bank deposit rates remain under 4%, and is cited by many analysts as a factor encouraging individual investors to shift their money into the stock market....


I've said it before and I'll probably say it again. There is absolutely no reason (in my opinion) that a truly strong economy needs to be paying negative real interest rates on bank deposits.

See Also:

Real Interest Rates

2 comments:

  1. The government will take action to stabilize prices, Premier Wen Jiabao said in a report published late Monday on the central government's website.

    "We have measures to ensure supply and we will take multiple measures to stabilize prices," Wen said during a visit to low-income residents in Beijing.

    Wen did not specify what action the government plans to take.

    His comments came a day before the government was due to release October consumer price data, which are expected to show prices accelerating to their highest rate in more than a decade.

    Higher consumer prices, especially for food, have become a major political issue in China in recent months. The government, always concerned with social stability, has stepped up moves to try to control prices.

    Wen noted that the recent rise in consumer prices has been driven by multiple factors, including higher international market prices for oil and grain, as well as a structural rise in domestic prices.

    Wen said that the government has sought to stabilize the market and avoid substantial price rises, including developing additional production and ensuring supply; improving materials allocation and storage; maintaining market order; using the international market to increase domestic supply; and ensuring a basic standard of living for low-income residents.

    "We have confidence that we will overcome the current difficulties and stabilize the market," Wen said.

    During the visit, Wen asked residents whether they could afford meat, and called on employers to gradually increase salaries and implement the minimum wage policy.

    http://www.iii.co.uk/news/?type=afxnews&articleid=6386617&subject=economic&action=article

    Kevin

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  2. Kevin,

    Yet another something for nothing plan. Sweet.

    The Something
    ...called on employers to gradually increase salaries...

    The Nothing
    The government will take action to stabilize prices...

    Well, with a plan like that how can they lose?

    ReplyDelete