The
recent bouts of inflation in China have somewhat spoilt the
party just before the Beijing Olympics, which is scheduled
to be held in the month of August. The inflation concerns,
which set off as a teething trouble during last year, have
turned into full blown crisis in the recent months. Despite
repeated efforts by the government to rein in inflation, the
price rises are showing no signs of abating and are hitting
the common man hard. Like many other countries, in China,
too, the rising food prices and the unbridled money supply
in the economy are prime culprits for the current crisis.
Added to it, the untimely blizzards have worsened the situation.
Consequently, in February, the consumer price inflation galloped
to a new 12-year monthly high of 8.7%. This, for obvious reasons,
has intensified fears that the higher food prices will spread
to other sectors of the economy and may even foment social
unrest in the country. Alarm bells have also been rung across
the globe as it is anticipated that inflation in low-cost
export giants like China can further aggravate global inflationary
woes.
Prices
in China began to rise since mid-2007 primarily due to the
shortages of grain and pork, the staple meat of China. To
stem the price rise, the Chinese authorities froze prices
of electricity, gasoline and other basic goods in September
and assured the Chinese people that the inflation worry would
be over once the autumn grain crops were harvested. But inflation
showed no signs of easing, rather it continued to rise unabated.
Fertilizer prices were also fixed to insure the farmers, and
restrictions were imposed on exports of grain to augment its
supply in the domestic markets. But all these efforts were
not sufficient to check inflation, which ultimately in February
reached the highest level since May 1996.
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