GF 323
CONFIDENTIAL
China's Inflation
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CRC INF 4/93
(CEC 2/93)
(1)
(2)
(3)
2.9% recorded
Summary
China's inflation rate, measured in terms of the
General Retail Price Index, was 5.4% in 1992. This
represented a significant acceleration from 2.1% and
in the preceding two years. In the
first quarter of 1993, it accelerated further to
8.6%. Inflation was much higher in the major cities
than in the rural areas. The trend of accelerating
inflation was causing much
leaders (paragraphs 3 to 5).
concern to the Chinese
A major contributory factor was the strong expansion in China's domestic demand, especially fixed asset
investment.
This excess demand was being
accommodated by the loose
monetary and credit conditions prevailing during 1992. Aggravating the
inflationary pressures were deficiencies in a number of major supply sectors, including notably energy, transportation and a variety of key raw materials.
The prices of many key materials recorded sharp
increases (paragraphs 6 to 13).
The
I.
Chinese government has been stressing the greater use of macroeconomic policy tools, rather than direct
administrative measures, in its approach to combat
inflation. A study of the possible fiscal and
monetary measures indicates that most of them are not very practicable under China's present circumstances and that credit control still appears to be the more
alternative. However, as the People's Bank
reliable
CONFIDENTIAL
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