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China needs higher inflation


Jun 27, 2021
BEIJING – Recent price increases in the world’s two largest economies have unnerved global markets, which have become accustomed to the low inflation and even deflation that has prevailed for decades.
But, at least in China, a little inflation would not be a bad thing.
In the United States, massive government spending during the COVID-19 crisis has raised fears of a financial reckoning, and recent price data are reinforcing these concerns.
The consumer price index (CPI) surged by 4.2% year on year in April the fastest growth since 2008. Moreover, the monthly increase accelerated to 0.8% in April, from 0.6% in March, although the rate fell back to 0.6% in May. The producer price index (PPI) has also risen, to 217.5 in April, up from 185.5 a year earlier. ....

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China still needs an expansionary economic policy


Apr 15, 2021
BEIJING – The Chinese economy grew by 6.5% in the fourth quarter of 2020, providing a strong indication that it has recovered from the COVID-19 shock. The market consensus is that, due to base effects, GDP growth shot up to more than 18% year on year in the first quarter of 2021, and will fall steadily in the remaining three quarters of the year before finally stabilizing.
Addressing this year’s meeting of the National People’s Congress last month, Prime Minister Li Keqiang announced that China’s growth target for 2021 is “above 6%.” While the economy’s growth momentum looks strong at the moment, there are signs that China may risk tightening fiscal and monetary policy too soon. ....

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