China showing signs of inflation

Discussion in 'Economics' started by curis, Jun 13, 2006.

  1. curis


    Early Data for May, including producer prices and money-supply numbers, indicate that inflationary pressure in China is building.

    The new numbers will keep policy makers leaning toward tightening measures, analysts say. But they said the central bank, the People’s Bank of China, is unlikely to take aggressive steps, such as raising interst rates or bank-reserve reqirements, until it has assessed the effects of a rate increase in April and recent curbs on the country’s property market.

    The producer-price index in May rose 2.4% from a year earlier, the National Bureau of Statistics said. snapping a string of months since September in which the year-over-year pace slowed. Last month’s gain was higher than the 1.9% increase in April.

    For the first five months of this year, the PPI, a measure of price changes in the pipeline, was up 2.6% from the same period a year earlier.

    Producer prices will likely receive a further boost in June because the data from May probably didn’t fully reflect an 11% to 12% increase in the ex-factory price-the price at the refinery gate and different from the retail or wholesale price–of domestic gasoline, dieset and let kerosene that took effect May 24. That increase was the biggest in three years.

    Many central banks around the globe–including the U.S. Federal Reserve and the European Central Bank– are grappling with inflationary pressures. Thursday, the European Central Bank, along with central banks from India and South Korea, raised interest rates, partly because of worries about inflation and a bid to stamp out a period of easy credit.

    China’s money-supply data also show indicate that price pressures remain strong. The state-owned ShangHai securities news reported that M2, the broadest measure of money suply calculated in China, rose 19.5% at the end of May from a year earlier.

    The central bank, which issues the data around the 10th of each month, wouldn’t comment on the Shanghai report.

    Economists polled by Dow Jones Newswires estimated that M2 rose 18.8% in May, after an 18.9% rise in April. The central bank has a 16% growth target for M2 this year.

    If the Shanghai report is accurate, May’s M2 figures would be the highest since the 19.6% growth posted in December 2003, the year Beijing began its last tightening cycle.

    In late April, the People’s Bank of China raised its benchmark lending rate 0.27% percentage point to 5.85%, and last month the country took administrative steps to curb a swift rise in housing prices.

    Bank Gov. Zhou xiaochuan said last week that the effects of monetary policy can’t be seen immediately and the bank is monitoring the situation, but it won’t raise rates right now.
  2. what are you talking about? inflation?

    in 1990, a salary of $50/month, yes, USD. can feed a family of 3. still have at least 1/3 of the money left over to put it in the bank.

    $50 was a salary of a civil engineer & a medical doctor. both with 10-15 years of experience.

    2006? the combined salary are at least 10-15 times higher.

    china's economy has been experiencing high inflation for the past 15years.
  3. I think China hasn't had inflation for 10 years (actually deflation), China had over 20% inflation during 1993-1996 period.

    You can't compare the salary like that. In 1990 a typical Chinese working family has free medical insurance and free apartment, now people have to pay for them with market prices. Also I don't think $50 in 1990 will be enough to feed a 3 person family well, $100 is a reasonable number.

    A medical doctor in China will be paid around $100-120 in 1990 and $500 nowadays in a middle-sized city.

    At least food is still very cheap in China.
  4. curis


    Hi, i was born in a small village in China.

    In 1990, a worker in a small city with USD $100 is common. My father was doing a very small business, he could earn about USD $150 ($1 = 8.9 Chinese Yuan at that time).

    in 1993, my brother-in-law sell vegetables in a small city. He could earn US $450 per month.

    Now the salary of a doctot in a middle city (with 5 year work experience) is about USD$ 700. But it's so common that he can earn USD$2000 per month. Because he has gray income.

    Gray income is so common in China.

    Now, my brother-in-law is a base worker in China telecom in a small city. His salary is about USD $130. But he can get a bonue of about USD$600 per month, sometimes USD $1200 bonus per month when the telecom can earn much money .

    Yes, there are so many poor in China, but that doesn't mean that all Chinese are very poor.

  5. Interesting, speaking of China, what could be the real reason for this?

    No G-8 Seat for China, Other Big Economies
    Saturday July 8, 11:09 pm ET
    By Tom Raum, Associated Press Writer
    G-8 Summit Is Billed As Meeting of World Economic Powers, but China and Others Are Left Out

    WASHINGTON (AP) -- The G-8 summit that President Bush and seven other world leaders are attending next weekend in Russia is often billed as a gathering of the world's leading economic powers. It is not. Consider: China, now the world's fourth-largest economy and the nation with the most influence over renegade North Korea, is not a member.

    Neither is India, the world's largest democracy and one of its fastest-growing economies. Nor is South Korea, Brazil, Mexico or Spain, each with a larger economy than G-8 member Russia's. In fact, Spain recently inched past member Canada as the world's No. 8 economy, according to a World Bank tabulation
  6. The G-8 is really just the G-7 with russia allowed in so that they would feel that they had a part in the post cold war world. I think that russia is probably allowed some knowledge about what is happening in the global geopolitical economic game without necessarily having much of a say.

    As far as spain having a larger economy than canada, I wouldn't put too much credence on that. Spain is an also-ran state, worse off even more than france, and will probably be largely politically irrelevant in 10-30 years as its population declines precipitously. Nice place to retire, though.

    Brazil hasn't clearly joined the first world yet, and like most south american countries, has a tendency to implode on a regular basis. The current leftist resurgence in south america makes a less than favorable outcome even more likely. Brazil need to demonstrate at least 7 more years of currency and debt stability before it is taken seriously.

    China is a competitor with the most potent geopolitical importance. The regime currently is friendly on economic terms but suffers its own internal problems which could threaten its legitimacy. If the internal government is overthrown, its more likely that a renewed people's revolution would occur and the resultant government would be a lot more hostile and hard-line to US interests. The current chinese regime doesn't seem to mind political change, as long as it is s-l-o-w. There is probably a reasonable prospect for further democratization of China in tandem with economic growth, but it is dependent upon the development of internal markets and further reduction of the striking difference in wealth between the city dwellers and the country dwellers. Its a dicey situation for us as well - foreign investment has built up China's manufacturing capability at the expense of the US's and that capability could be turned around into military production. Best to keep things going at a fairly even keel from a geopolitical standpoint. Finally, China hasn't been willing to float its currency, which is probably a big limiter to other countries to let it into the 'club'. But the recent float of the BOC is encouraging... even interesting. The second crack in the wall.

    India hasn't proven itself worthy of joining the club yet, but it is a rising power. Out of the countries discussed, I would not be surprised if it was the next country allowed into the G8, making it the G9. India provides the counterpoint to China and Pakistan, and 'closes the gap' in the middle east further. I believe that the first world has more in common with India than China.

    Expect more interest & currency movements after G8. That seems to be the pattern lately.