China Inflation, Chinese Inflation

Inflation in China soared during the 1930s and 1940s, when the country’s economy became highly unstable. The economic scenario worsened due to a civil war in the late 1940s. Food prices soared and hit purchasing power. In the early 1950s, the government implemented a series of recuperative measures, such as currency reforms, nationalization of banking institutions and the strict regulation of product prices and money supply. These policies continued till 1978. Owing to this, China succeeded in achieving record breaking price stability.

Inflation in China soared during the 1930s and 1940s, when the country’s economy became highly unstable. The economic scenario worsened due to a civil war in the late 1940s. Food prices soared and hit purchasing power. In the early 1950s, the government implemented a series of recuperative measures, such as currency reforms, nationalization of banking institutions and the strict regulation of product prices and money supply. These policies continued till 1978. Owing to this, China succeeded in achieving record breaking price stability. Between 1950 and 1978, there was only a marginal increase of 0.6% in the retail prices of consumer products.

As the government reduced its control, China’s inflation reappeared. In 1980, urban residents were hit by a 7.5% inflation rate. Inflation spiked again in 1985 to 11.6%. In 1990, the government managed to control the inflation rate, bringing it down to 6.1%. According to the Central Intelligence Agency’s World Factbook, China’s inflation rate for 2003-2006 was:

Year Inflation Rate 2003 -0.80% 2004 1.2% 2005 4.10% 2006 1.80%

 

China Inflation: Statistics

The International Monetary Fund (IMF) has been calculating China’s inflation rate since 1980. A tabular presentation of its findings reveals that there have been irregular periods of ups and downs over the past two decades.

Year Inflation (Average Consumer Prices) 1980 5.988 1981 2.383 1982 1.928 1983 1.5 1984 2.828 1985 9.3 1986 6.5 1987 7.3 1988 18.8 1989 18 1990 3.1 1991 3.4 1992 6.4 1993 14.7 1994 24.1 1995 17.1 1996 8.3 1997 2.8 1998 -0.8 1999 -1.4 2000 0.4 2001 0.725 2002 -0.767 2003 1.167 2004 3.9 2005 1.8 2006 1.467 2007 4.752 2008 5.857

China Inflation: Steps to Control It

In August 2007, the monthly consumer price index reached a decade-high of 6.5%. This resulted from an alarming rise in the price of food products. To control the inflation situation, the Chinese government tightened its monetary policy. A series of anti-inflationary measures, such as a reduction in product prices and a rise in the interest rate and the cash reserve ratio, were implemented. A stronger Yuan also facilitated the regulation of the inflation rate to an extent.