Never ask the barber if you need a haircut, so they say. Chinese premier Wen Jiabao has declared inflation dead in a guest column for the Financial Times. The whole article is worth a read, but he saves his best for inflation:
There is concern as to whether China can rein in inflation and sustain its rapid development. My answer is an emphatic yes. Rapid price rises pose a common challenge to many countries, especially other emerging economies and China. China has made capping price rises the priority of macroeconomic regulation and introduced a host of targeted policies. These have worked. The overall price level is within a controllable range and is expected to drop steadily. The output of grain, of which there is now an abundant supply, has increased for seven years in a row. There is an oversupply of main industrial products. Imports are growing fast. We are confident price rises will be firmly under control this year.
Phew. That alleviates my concerns.
I happened to be reading the latest edition of Grant’s Interest Rate Observer as Wen Jiabao landed in my inbox. Continuing on with the short-China themes of his previous edition, Grant has a somewhat different view to the Chinese premier’s:
An artificially low exchange rate is inflationary. An artificially set of exchange rates is likewise inflationary. Plastering an economy with cheap, state-allocated bank credit could be inflationary in the short term, deflationary in the long term. Anyway, it’s unhelpful.
Functional cookies Always active
The technical storage or access is strictly necessary for the legitimate purpose of enabling the use of a specific service explicitly requested by the subscriber or user, or for the sole purpose of carrying out the transmission of a communication over an electronic communications network.
The technical storage or access is necessary for the legitimate purpose of storing preferences that are not requested by the subscriber or user.
The technical storage or access that is used exclusively for statistical purposes.The technical storage or access that is used exclusively for anonymous statistical purposes. Without a subpoena, voluntary compliance on the part of your Internet Service Provider, or additional records from a third party, information stored or retrieved for this purpose alone cannot usually be used to identify you.
The technical storage or access is required to create user profiles to send advertising, or to track the user on a website or across several websites for similar marketing purposes.