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China Might Need to Focus on Growth, not Inflation
Jun 30, 2008 (China Knowledge) - Jun. 30, 2008 By Tiger Tong
Though the consumer price index (CPI) in China abated a bit in May, the continued monetary policy had little to do with it. The overall scenario suggests more upward inflationary pressures down the road. However, China may soon find that inflation is not the most important target to focus on.
Since March 2007, China’s inflation, measured by CPI, seems to have been out of control. In February 2008, a once-in-a-half-century-chance snowstorm pushed the CPI to an 11-year high of 8.7%. Lessons learned in late 1980s and early 1990s have resulted in China fighting inflation vigorously. In 2007, China increased interest rate six times and bank reserve ratio 10 times. In 2008, the need to avoid a more abrupt appreciation of RMB against the U.S. dollar, China was forced to stop using interest rate hike for tightening money supply. However, it has increased bank reserve ratio six times year to date... Full Story
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