Economists attached to the People’s Bank of China jumped into the debate on inflation on Friday. Far from expecting the consumer price index to subside back below the comfort zone of 3 per cent, the think-tank sees it rising to 3.2 per cent this year. China is already bearing some of the scars, including negative real interest rates (after tax) which have helped fuel the Shanghai stock market bubble. Higher prices have also led to a series of modest tightening measures, with more likely to come.

How high could inflation go? The jury is out until the summer harvests are in – the higher rates now are almost wholly down to volatile food prices. But there are structural issues affecting food prices too, including less farmland and richer diets, which suggest higher bills could be more permanent. Further down the line, it is likely the Chinese will have to fork out more for utilities, as part of price liberalisation. As the basket of goods used to track consumer prices catches up with reality (in so much as an index covering both sophisticated megacities and rural backwaters ever can), there should be further adjustments. The opaque nature of the consumer price index and absence of follow-through from, say, higher hospital bills, suggests official numbers understate the real picture.