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Serious Inflation Threat is a Reality

Fast rising food prices and continued expansion of capital investment and consumer spending are a real threat for serious inflation across-the-board in China’s economy, according to this article published in Outlook Weekly, a subsidiary of Xinhua News. In the first two months of 2008, the prices of meat related products have risen 43.3%, with 70.3% on pork meat alone, on top of the already high 31.6% and 53.9% increases in year 2007. Other products such as vegetable oils and oil-bearing crops have also seen 40-50% price increases over the same two month period. The grain price, in the mean time, has only risen 5.9% during the same period but is expected to catch up soon as pressure is mounting from the double digits monthly rise in the prices of agricultural materials since December 2007. Capital investment that has been growing at a fast pace of a 25% annual increase for the past five years, coupled with the recent rapid increase in consumer retail spending, 18% and 20.6% for two recent quarters respectively, means that all-out inflation has become a serious reality.

Source: Outlook Weekly, April 29, 2008