Skyrocketing prices - Officials, Media Blame China Inflation on US

[GoFlyKiteNow]

Chinese Officials and State Media Blame China Inflation on US
Last Updated: Dec 11, 2010

Skyrocketing prices of everyday goods in China threaten the standard of living of the country’s poorest citizens, as well as its nominal middle class. Given the potential dangers faced by the Communist Party as public discontent swells along with inflation, the United States has become scapegoat Number One.

From soybean, ginger, garlic, to cotton and sugar, surging prices have struck one product after another since the beginning of the year. The China Securities Journal described cotton prices in October as “crazy.” Cotton has increased 93 percent compared with the same period last year.

Recently released data by the Ministry of Commerce shows that wholesale prices for 18 kinds of popular vegetables have increased 62.4 percent on last November.

Beijing’s ‘Blame Game’

Chinese officials and opinion leaders have turned to blaming the U.S. for the difficulties.

In a recent forum on foreign trade, Minister of Commerce Chen Mingde warned Chinese companies about the impact of inflation on imports, saying that “the U.S. dollar supply is uncontrolled, and international commodities keep increasing in price,” according to a Nanfang Daily report.

In a widely circulated article in mainland Chinese media, deputy dean of the School of Economics at Fudan University, Sun Lijian, questioned whether China is prepared for the effects of the United States’ “exporting” inflation to the world.

Zhang Jiye, in an article published by the Beijing-backed Global Times, criticized the Federal Reserve’s Quantitative Easing monetary policy as a strategy designed to slow down China’s emergence as world power.

Chinese Premier Wen Jiaobao in recent comments also criticized the U.S for shifting the responsibility for the global economic imbalance onto China, according to a Caihua Net report.

Wu Fan, editor-in-chief of China Affairs, believes the current inflation is due to the extremely loose monetary policy previously adopted by Beijing to stimulate Chinese economic growth; he believes the purpose of current media reports is to shift public attention and resentment from this fact.

He cites official data which shows that, ten years ago, China’s Gross Domestic Product was one and a third trillion U.S. dollars, while the country’s broad money supply (meaning the amount of money in circulation) was about two trillion. This amount nearly equals 670 billion dollars beyond China’s total GDP.

Comparing 2009’s figures in dollars, China’s GDP was about five trillion with a money supply of nine trillion, four trillion dollars of excess money supply over production; in other words, much more money than needed has been in the economy.
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[GoFlyKiteNow]

At Center of China’s Real Estate Problems: the Communist Party

Housing prices in China are still on the rise, and owning a home is far from affordable for most Chinese. A recent report hints at the extent of the problem, including the startling fact that 85 percent of city residents who need a new house cannot afford one.

It all hinges on China’s Leninist-corporatist political economy, according to prominent economist He Qinglian.

The Chinese Communist Party (CCP) often takes centre-stage in all major strategic sectors in China, and real estate is no exception.

A situation has arisen whereby those affiliated with the Party benefit from favorable policies, while the majority is left out in the cold.

The Chinese Academy of Social Sciences’ (CASS) “Blue Book,” an annual report on social conditions in China, points out that the housing price has increased 15 percent this year.

They report that between Nov. 29 and Dec. 5 average house prices hit a record high, at 23,489 yuan per meter square (US$321 per square foot)

The China Index Academy, a large property research institute, says that in November this year the average housing price in 100 cities was 8,487 yuan per meter square (US$116 per square foot), a 0.82 percent increase from October. In Beijing and Shanghai the average was US$212 per square foot, a 0.41 percent increase from October and a 34.2 percent increase compared to the same period last year.

The continued rise is puzzling, given the housing price control measures the regime has implemented. Under unprecedentedly strict government management, why is the price of housing in China still rising like mad?

To answer that He Qinglian pointed at the CCP.

For example, a recent survey of low-ranking officials in Shanghai showed that some of them owned 5 or 6 houses, the majority between 10 and 20, and that some had as many as forty-odd homes.

“The main house buyers in China are this group of people,” Ms. He said.

According to Ms. He, the communist regime is the driving force behind China’s constantly rising housing price increase, for several reasons. Firstly, it is the only source of land; secondly, the central Party’s income, especially from local governments, depends on land and housing sales.
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[Dreamer1]

A mistake which they learn fr tiny Singapore.

It is crazy to follow 900 km2 Singapore policy when PRC is 9,640,821 km2

What the commies should copy fr LKY is rule of law,rule by laws(in commerce ONLY)That would do them good.

 

[longbow]

I believe that US policy to devalue the $ is having dire impact on the BRIC countries. This is especially true if the BRIC countries continue to maintain peg to US dollar.

After all Chinese economy is flying at 10% (if it were 5% as some believe then there is no issue with inflation) so it does not take much to tip it into high inflation.

But I believe that Beijing is well poised to tamp down inflation. As it is, it needs not run budget deficits to subsidize prices.

 

[Dreamer1]

<<But I believe that Beijing is well poised to tamp down inflation. As it is, it needs not run budget deficits to subsidize prices..
On the other hand,it cant stop creating RMB as well.

 

[Dreamer1]

I believe that US policy to devalue the $ is having dire impact on the BRIC countries. This is especially true if the BRIC countries continue to maintain peg to US dollar.

After all Chinese economy is flying at 10% (if it were 5% as some believe then there is no issue with inflation) so it does not take much to tip it into high inflation.

But I believe that Beijing is well poised to tamp down inflation. As it is, it needs not run budget deficits to subsidize prices.

Keqiang ker-ching
How China’s next prime minister keeps tabs on its economy
China's economyDec 9th 2010 | HONG KONG | from PRINT EDITION

.IF CHINA’S deputy prime minister, Li Keqiang, succeeds his boss, Wen Jiabao, in 2013, as is likely, he will become his country’s top economic policymaker. But he may not pay much heed to the figures provincial officials feed him. In 2007 he told America’s ambassador that GDP figures in Liaoning, where he was then party chief, were “man-made” and unreliable, according to a State Department memo released by WikiLeaks.

Provincial officials have long been suspected of overstating growth. Adding their figures together suggests that China’s economy was $364 billion bigger in 2009 than the total in the national accounts. Mr Li preferred to track Liaoning’s economy by looking at other indicators: the cargo volume on the province’s railways, electricity consumption and loans disbursed by banks.

.In Mr Li’s honour, The Economist has created a “Keqiang index” for China’s economy, combining his three preferred indicators (see chart). It reveals an economy that is as dynamic as the official figures suggest, but a great deal more volatile. Electricity consumption and cargo traffic both shrank in the final months of 2008 and in early 2009, implying that China’s economy suffered more grievously than the official figures allow. A loan surge in 2009 presaged the rapid recovery that followed.

It should come as a relief to all those who doubt China’s economic statistics (ie, just about everybody) that the people in charge of its economy do not entirely trust them either.

http://www.economist.com/node/17681868