China Now Facing Inflation Along with Building Economic Crisis238 views 2012-10-06 00:19 Tags: China
“Inflation in the Chinese economy has become an issue that
could escalate in economic problems for the country,” notes Lombardi. “The
Consumer Price Index in China rose by 2.0% in August 2012 from August of last
year, the big problem is food prices—they rose 3.4% in August from August
In the article “Perfect
Economic Storm for China: Slow Growth and Rising Inflation,” Lombardi
states that if inflation in China
keeps rising, the government’s intentions to ramp up the economy with monetary
stimulus could be tempered.
Lombardi recalls the events of 2008, when attempts to boost
the Chinese economy resulted in higher-than-expected inflation and a bubble in
real estate prices.
According to Lombardi,
bank has already cut interest rates in both June and July to promote economic
growth. However, Lombardi observes that the improvements from these rate cuts
in the Chinese economy are yet to be seen.
According to Lombardi, Chinese industrial output rose by
only 8.9% in August compared to 9.2% in July—the lowest growth since the May of
2009. Chinese exports are still in a slump, he adds, noting that they have only
grown by 2.7% in August, compared to one percent in July.
“The increase doesn’t amount to much when last year the export
growth rate was over 20%,” Lombardi points out.
Lombardi concludes by stating that any economic slowdown in the Chinese economy will affect the U.S. economy: “With the U.S. becoming one of the biggest export markets for China, the question arises: is the U.S. economy growing enough to give China the export market lift it needs to grow? The answer is: of course not.”
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