Inflation is universally viewed as a scourge. But it appears to be seen as a worse scourge in China than in other countries. At the moment, Beijing is obsessed with keeping the annual inflation rate below 4 percent, its declared target. Yet based on the latest figures, the government is losing the inflation fight.
First, some data and a little background. To be sure, rising inflation isn’t a recent economic challenge for China—prices were spiking as early as last autumn. What makes China’s recent round of inflation fighting interesting is the apparent ineffectiveness of the measures adopted by the government, including raising interest rates, hiking the bank reserve ratio (so that less money is lent out), and imposing price controls on some goods.
Read Full Article »