Inflation – China’s Lost Battle – Chan Akya
From Asia Times Online:
“Inflation is always and everywhere a monetary phenomenon.” Milton Friedman‘s eternal quote must be ringing around the corridors of power in Beijing, after official statistics showed a surge in inflation to 6.9% in November, the highest level recorded recently. Notably, it is not only food but also other items in the basket that are pushing up prices in China, which in the context of industrial overcapacity in most sectors, is saying something. The problem of inflation is more serious than corruption, according to a survey of young Chinese leaders.
While some factors such as a government-mandated increases in diesel prices helped to push up CPI in November, the overall trend of money supply staying out of control is unmistakable. Look at the diesel story for example: the government mandated a price increase in order to reduce demand, a strategy that seems to have failed completely, going by anecdotal evidence from Chinese refiners. [Full Text]