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Study Times: China Cannot Afford 5% to 6% Inflation

Inflation in China has been driven by constant food price adjustments and a 10%+ food price increase, which puts excessive pressure on low-income residents, resulting in major social upheaval, said a Study Times article.  

The article disagrees with some Chinese economists who advocate a moderate annual inflation of 5% to 6%. While the Consumer Price Index (CPI) may remain low, food prices have increased significantly, pushing the CPI upward.  

The populace can’t adjust to the 5% to 6% CPI increase because of the veiled food price increases. In 2004, 2007 and 2008, the CPI increased 3.9%, 4.8% and 5.9% respectively. “These are the three years when the populace was most unhappy about existing price controls."  

Should food prices increase by more than 3%, "major social problems will ensue," said the article. 

Source: Study Times, September 6, 2010