Inflation The Biggest Threat To China, According To Authorities

By Stewart Douglas

Chinese authorities have announced that inflation is likely to pose the biggest threat to their economic health and development over the short term.

The announcement came after startling increases in the price of food, which analysts say have the potential to lead to civil unrest within the economy, as families struggle to meet the rising costs of foodstuffs and basic living expenses.

The Chinese economy has experienced a rebirth over recent years, after Communism suppressed free industry and international trade.  However, since the adoption of more Westernised economic strategies, the country has flourished to be tipped with some certainty as the future number one in terms of size and output.

However with increasing wages and living standards, prices across ordinary consumer goods and raw materials are continuing to increase beyond earnings increases, leaving a deficit in income.

Furthermore, China has experienced rioting in the past on the back of growing food prices, suggesting that this may still pose a much more significant problem for the Chinese authorities, and many political analysts consider the Tiananmen Square demonstrations to have been linked to inflation.

In recent weeks, the Chinese government has increased interest rates and the bank CCR, which dictates the percentage of total cash assets banks are required to hold as deposits, in a bid to curb inflation, and many analysts suggest that for the time being, the situation overall is in hand.

However, recent economic indicators, including the consumer price index, have shown inflation to have grown to 5.6% to a ten year high, which will inevitably have an adverse affect on business and consumer buyers.

Added to that is the significant decrease in wheat supply worldwide after more severe weather patterns have destroyed much of global crops, which could further lead to the increase in the cost of basic foods like breads and pasta.