It is somewhat facile to talk in terms of a consistent party line, but it is pretty interesting to hear what influential individuals have to say.
“Don’t worry about it, 5 per cent is not really a problem” was the view espoused last night by one of my professors, a highly respected Chinese economist who sits on the monetary policy committee in China. His line of reasoning had four main facets:
- inflation has been much higher before – 20 per cent in 1988, 25 per cent in 1994
- much perceived inflation is actually increasing standards of living – eg next year another 100m people won’t be able to live without a flat-screen TV
- the poor people who really suffer from food-price inflation can be helped by food stamps and subsidies distributed by the cash-rich central government.
- much inflation is driven by global commodity price increases, so the Ministry of Finance should cut taxes on businesses exposed to significant imported commodity price rises
In a longer-term context, the key will be to reduce the energy (and resource) intensiveness of each unit of GDP, to sustain the habitual 8 per cent plus growth rate without becoming yet more exposed to global commodity prices.
It sounded like a pretty compelling argument to me and I thought it worth sharing.
In a more general sense, it’s awesome having guys like this teaching on the programme – this kind of access is priceless here in China.
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