We’ve all been horrified by the sheer volume of money pumped by the Fed into our economy. We’re not the only guilty parties when it comes to quantitative easing, however – Britain has followed suit as well as the Euro zone.
But quite possibly the biggest offender has been China, whose economy is both awash in money and experiencing something of a rebound – with predictable results. From Peter Foster at the UK Telegraph:
Prices in China are now rising too fast for comfort, as the latest data from China’s National Bureau of Statistics confirmed on Wednesday, with consumer price inflation (CPI) leaping 1.9pc in December after a 0.6pc rise the previous month.
The statistics bear out what the traders have observed for almost six months now, the cost of food, which makes up one-third of the CPI basket, has risen appreciably from a year ago.
“The cost of a kilo of tomatoes has gone up from 3 yuan (27p) to 5 yuan (45p) which is too much, said Zhang Jianyong, a trader from Hebei Province south of Beijing, “all the farm products are seeing prices hikes at the moment.”
With the exception of potatoes and pork, all the other staples spot-surveyed by The Telegraph showed price rises, with white cabbage (a favourite of millions of Chinese households) and river fish showing the sharpest rise at almost 50 per cent compared with last winter.
And the government is now putting the brakes on:
This week China took steps to curb bank-lending after reports that banks had issued 1.1 trillion yuan (£99bn) in new loans in just the first two weeks of the year, a massive amount when set against a 7.5 trillion yuan target for the whole of 2010.
Measures have also been announced to rein in speculation in China’s scorching property market (which is not factored into the CPI basket) which saw average prices in the China’s 70 largest cities rise 7.8 per cent in December from a year earlier.
As Foster notes in his own blog, China is going to have to make some astute – and lucky – economic guesses in the coming months.
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