Chinese Growth Strong, Inflation Fears Mounting

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"Chinese Growth Strong, Inflation Fears Mounting"

China’s stimulus seems to be working nicely:

China’s economy grew by 8.7 percent in 2009, according to the National Bureau of Statistics. China’s fourth quarter growth alone surged to 10.7 percent on an annualized basis. China’s economy has been picking up pace the first three quarters of the year, growing at 6.2 percent the first quarter and 7.9 percent the second quarter and 9.1 percent in the third quarter.

The economy seems to be now facing some inflationary pressures, so people are expecting the Chinese authorities to ease off on the throttle somewhat.

These official Chinese figures are always subject to some doubt, but it is worth emphasizing that what the Chinese say they’re doing has a nice clear logic to it. When the world entered a major downturn, China applied major stimulus. Really across the board stuff. They weren’t trying out some one guy’s pet theory. The government spent money, they did credit easing, they stimulated consumer demand (“retail sales rose 16.9 percent in 2009″), they did infrastructure, they did exchange rate policy, they did a lot. People warned that all this stimulus might create inflation, but China kept doing it anyway. Now, GDP growth is back on track and there’s actual evidence of inflation happening so they’re looking to pivot. Policymakers in the developed world—especially Europe—have, by contrast, spent much of the past twelve months doing the equivalent of worrying about a flood while standing in a burning house.

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