Inflation on The Fall In China

October 14 00:00 2011

New York, October 14 ( – All the indices which report Chinese inflation have been shown to be pointing in the downwards direction. Inflation has been on the fall in China. Some of the numbers which suggest so are as follows.

  • Producer prices rose 6.5% in September as compared to 7.3% in August and 7.5% in July
  • Food inflation remained at 13.4%, down from 14.8% in July
  • Consumer prices rose 6.1% in September compared to 6.2% in August and 6.5% in July

These figures are facts that the Chinese efforts to rein in inflation have actually bore fruit. However, the way these results have been reached may actually prove to be counterproductive for China.

For instance, China has let the renminbi appreciate in the forex market. This is a break from its usual policy of keeping the renminbi undervalued. The result has been that imports have become cheaper. On the back of cheaper imports, the Chinese prices have been reducing.

However, this may be at the cost of their very basic business policy. China is an export driven economy and the rising yuan will only make exports worse. Hence while the Chinese consumer is enjoying the fall in prices, they may soon find themselves out of jobs, if things are not controlled.