China . Inflation

Latest recent data confirms inflation at 5.3 %.

To say that this is high or low or adequate without further data is simply somewhat superficial .

Indeed it is important to know if inflation to demand is caused by an acceleration of consumption by a stable number of consumers or is caused by the increase of active population or extended reachness to bigger number of potential consumers .

If the inflation is caused by a better distribution of reachness and the increase of the active population the data has to be accepted as healthy .

If the inflation is caused by the acceleration in purchassing of a reduced number of consumers with extraordinary bursting of reachness , then the data is very grave because this situation is the one that forces increase of salaries to many millions of chinese workers thereby causing further escalating inflation

Besides it is good to remember that with China as the second world largest economy , inflation in China becomes the propeller of energy and raw materials costs accross the planet , affectting very negatively the world balance .

In conclusion is not subject to critics that China grows to approach the standard of living in the west , but the chinese growth canot be based in the extremely fast income of a few chinese millions at the expenses of the loss of reachness of many millions of chinese with limited salaries dented by inflation and the imbalances caused to the stalling of western markets worsened by the uncontrolled increase of commodity prices .

If chinese government officials reflect on this , they will have no difficulties to realise that for americans to be able to make a reliable plan to quench deficits it is inevitable that China controls all parameters affecting chinese growth first ,

Increasing of interest rates alone will not be enough to rein in inflation . It has to be complemented with a redesigning of chinese tax system .

Brahmason

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Published in: on mayo 11, 2011 at 11:03 am  Comments (1)  

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    China . Inflation | Brahmason’s Blog


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