CONFIDENTIAL # 3
CRC INF 13/88
(CEC 7/88)
Inflation in China and
its implications for
the economies of China and Hong Kong Executive Summary (paragraph references refer to the main paper)
Current rate of inflation in China
Measured in terms of retail prices, the rate
of inflation in China was 13% in the first half of 1988
and is still accelerating. The year on year figure for
June was 19%. This rapid inflation has occurred against
the background of a sustained period of very rapid
economic growth and substantial improvement in the
general living standards for the average individual in
China (paragraphs 2 to 5).
Underlying causes of inflation in China
2.
In
On the supply side, China's economy has been
able to achieve rapid growth in industrial output, but
it has been much less successful recently in increasing
the supply of a number of key agricultural products.
addition serious bottlenecks have developed in such
critical sectors as energy, industrial raw materials,
transport and communication facilities (paragraph 7).
On the demand side, there has been an unleashing of
purchasing power because of very substantial increases
in incomes coupled with a shift of social attitudes in favour of high consumption. More recently, fears of further inflation has led to a flight from money into goods (paragraph 8). Runaway capital construction has
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CONFIDENTIAL #3
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