China's Top Priorities in 2008: Reduce Economic Overheating and Curb Inflation

Mar 28, 2008

Concerned about their country’s unprecedented high growth performance, the Chinese Government has declared reducing economic overheating and curbing inflation as its top priorities for 2008.

According to a study in China & World Economy published by Wiley-Blackwell, there are growing concerns over a possible ‘hard-landing’ for the Chinese economy as no economy can sustain such strong growth for a long period.

In November 2007, the consumer price index shot to 6.9 percent, while annual inflation rose to 4.8 percent – well above the government ‘comfort level of 3 percent. On the back of five consecutive years of double-digit growth, high growth in 2008 is still expected to continue while problems associated with such, growth will also remain.

Author of "China’s Economy in 2007/2008: Coping with Problems of Runaway Growth", Professor John Wong says, "Any economy undergoing long periods of high growth will inevitably develop structural tensions, giving rise to distortions and imbalances as well as rising negative externalities. Cracks are bound to show up sooner or later."

China is currently facing a type of cost-push inflation which is fundamentally caused by undervaluation of the Renminbi, which in turn is attributable to China’s chronic external and internal macroeconomic imbalances.

"China’s inflation has yet to generate serious inflation expectations as the Chinese government is still able to contain the inflation with measures such as reducing supply bottlenecks, stabilizing prices through controls and subsidies, and curbing speculative activities", says Professor Wong.

On whether China’s growth can be decoupled from the effect of the current US economic uncertainty, Professor Wong argues that if the expected US recession is mild and short-lived, this could be a welcome breather for the overheated economy under a long spell of high growth. "But China", he adds, "like other economies, cannot escape unscathed from a prolonged and severe US recession".

This paper is published in the March-April 2008 issue of China & World Economy (Vol. 16(2), Pg. 1-18).

Source: Wiley

Explore further: Best of Last Week—Confirmed Earth-sized planet, testing twin paradox w/o a spaceship and news we all peak at 24

add to favorites email to friend print save as pdf

Related Stories

US lead in science and technology shrinking

Feb 06, 2014

The United States' (U.S.) predominance in science and technology (S&T) eroded further during the last decade, as several Asian nations—particularly China and South Korea—rapidly increased their innovation ...

Anonymous hacks Argentina data agency

Jan 17, 2013

Hacker group Anonymous blocked the official website of Argentina's National Institute of Statistics and Census amid an international stand-off over claims the country has lied about its economy.

Recommended for you

Math modeling handbook now available

2 hours ago

Math comes in handy for answering questions about a variety of topics, from calculating the cost-effectiveness of fuel sources and determining the best regions to build high-speed rail to predicting the spread ...

Archaeologists, tribe clash over Native remains

2 hours ago

Archaeologists and Native Americans are clashing over Indian remains and artifacts that were excavated during a construction project in the San Francisco Bay Area, but then reburied at an undisclosed location.

Male-biased tweeting

4 hours ago

Today women take an active part in public life. Without a doubt, they also converse with other women. In fact, they even talk to each other about other things besides men. As banal as it sounds, this is far ...

Developing nations ride a motorcycle boom

5 hours ago

Asia's rapidly developing economies should prepare for a full-throttle increase in motorcycle numbers as average incomes increase, a new study from The Australian National University has found.

User comments : 0

More news stories

Male-biased tweeting

Today women take an active part in public life. Without a doubt, they also converse with other women. In fact, they even talk to each other about other things besides men. As banal as it sounds, this is far ...

Archaeologists, tribe clash over Native remains

Archaeologists and Native Americans are clashing over Indian remains and artifacts that were excavated during a construction project in the San Francisco Bay Area, but then reburied at an undisclosed location.

Math modeling handbook now available

Math comes in handy for answering questions about a variety of topics, from calculating the cost-effectiveness of fuel sources and determining the best regions to build high-speed rail to predicting the spread ...