Higher inflation could help to rebalance China’s economy

In other circumstances, 2, 3 years ago, maybe, now, I think not.
Argentina's inflation data is wrong. All official data are manipulated by the Government. Real inflation 25%-30% and 35% projected for 2011.

The assumed relationship between higher inflation and a higher real exchange rate is a loosely knit argument; it is based on 2 assumptions:

1. an assumption that Chinese inflation is solely driven by internal (unimported) components (labor and the likes). and ignores that it's also driven by commodity/energy prices on the rise. (which is not the case)

2. that China is fully able to pass through inflation in export prices. (more realistic than assumption 1)

All I know is that inflation ridding on comparable wage hikes will not increase domestic consumption. So I don’t see how inflation is good to China unless it tails the wage increase percentage wise by a comfortable margin.

China needs to be mindful of its inflation a lot more than some economists argued. I am still at loss when I read Mr. Tim Geithner, US Treasury Secretary, was quoted saying recently that China’s inflation is good to the US. In what way, I 'd venture to ask?

And you can not talk about today’s inflation without talking about QE 1&2. For example food prices raised or inflated by about 40% in Egypt after QE2 according to some account. (Weather played a part perhaps, but not to that wild of a swing.)

It almost seems certain that inflation may have acted as the last strew to inflaming “Jasmine” revolutions in north Africa and Egypt, not necessarily all of them rosy for strategic thinking of the West, or the East for that matter, IMO.

China will try to do anything it can to curbe inflation, except for the very one thing that would probably do the job quiet easily: revalue the currency.

The numbers are pretty low.
I don't know anyone here, local or foreign, who honestly believes the inflation is lower than 10%.

It seems to me that the author is saying that the Chinese government is ably managing its economy.

The comparisons to mistakes made my Latin American economies and the successes by East Asian economies means that China is following a logical path to future development.

The Chinese becoming richer has yet to make anyone else poorer!

Economist, once again you failed to look at the REAL risk of inflation!

Inflation is obviously a necessary part of any economic growth, and it essentially means that the quality and the cost of living are rising. But the problem in China, such as in many other capitalist nations around the world, is that wages are not rising for everyone: Some (or most) people do not experience a rise in their wages as inflation rises - and that will lead to a wider social gap and to trouble in the forms of social unrest. To those who disagree look at Egypt and Tunisia, where gaps got too big to bridge.

I have written an interesting post about this issue on my blog: laowaiblog.com/currency-war

I invite everyone to read and to comment

Thank you!

The author needs urgently remedial course on Chinese culture and tradition. While in other cultures, South America in particular, a higher inflation will spur consumption, in China any sign of inflation, real or perceived, will spur consumers to cease consumption and jack up the already ridiculously high saving rate of 30%-40% even higher.

i don't think the inflation is good to china. in china ,the inflation makes most people hard to live and the high prices make chinese more tough to kill the life.

No, absolutely wrong. I'll tell you what the situation is "on the ground" as an American foreigner in China.

Inflation would wreck the lower and "middle" class in China and benefit the investment upper-class. This would exacerbate the income gap and lead to massive instability.

Savings and investment "look high" because there are very little social or government supports. Social security is in its infant stages of reform and public medical insurance is at least 10 years away from being a real support for the people.

Poor people in China (that is to say, 80% of the population) already consume as much of a portion of their budget as they can. Inflation would cause them either to consume even less (an impossibility when already at the razor's edge of starvation) or dip into their savings, which would render them unable to cope with rising interest rates for homes, rising medical costs, rising educational costs, and other such severe life risks which require savings.

Rich people in China can easily evade the effects of inflation. They can invest in appreciating assets or consume more on luxury goods that are likely to rise even more in price, such as baijiu (Chinese liquor, which is unbelievably expensive in China compared to the US or Europe), Apple products, paintings, etc.

Besides the obvious effect on stability, I hope I have shown you that rising inflation has the potential to decimate the people who have been up until recently slowly climbing out of poverty into better jobs and education.

I hope that future commenters understand that anti-inflation worries are not just CCP propaganda. There are many here, such as myself and Liorp, who are not "50 centers" and have no vested interest in the country besides wanting to see it succeed. Our views do not always coincide with the national government's views, but are instead based on reality as we perceive it based on first-hand living experience in China.

Besides "50 centers," there are also real, unpaid Chinese people who visit this forum and other news websites in order to widen their viewpoint and participate in this global discussion. I urge those with opposing viewpoints to be civil and not so quick to dismiss all Chinese people posting here as shills. It is transparently xenophobic and certainly rude.

Sensible GaTech Student wrote,
Inflation would wreck the lower and "middle" class in China and benefit the investment upper-class. This would exacerbate the income gap and lead to massive instability.

Savings and investment "look high" because there are very little social or government supports. Social security is in its infant stages of reform and public medical insurance is at least 10 years away from being a real support for the people.

Poor people in China (that is to say, 80% of the population) already consume as much of a portion of their budget as they can. Inflation would cause them either to consume even less.

——I am not sure that you are an American foreigner in China. But I basically agree to your viewpoint above. As a poor country, Inflation in China is harmful for most people also including “upper-class”. Inflation may lead to less consumption that is also serious. A proper deflation can expand domestic demand and consumption. This is a normal response of market and people. But in other countries, I think something shows the opposite.

In my opinion, Chinese government currently wants inflation to restructure its economic structure, lifting labors' wage and improving people's living standard.

However, what out of their expectation is that rising asset price seems far faster that rising wage. People now in China could feel painful for almost unaffordable food and houses, especially in big cities. So, the surging interest rate keeps going, and they even manage to regulate the number of houses owned to avoid asset inflation which they worry about most.