CONFIDENTIAL #≈
CRC INF 13/88
(CEC 7/88)
Inflation in China and
its implications for
the economies of China and Hong Kong
Introduction
Inflation has become the single most important economic problem currently facing the Chinese Government. This paper attempts to analyse this issue and its possible implications for the economies of China and Hong Kong.
Current rate of inflation in China
2.
The year-on-year rate of increase in retail prices in China in the first half of 1988 was officially put at 13%, the highest level recorded since 1961 - the year immediately after the disastrous Great Leap Forward. The corresponding rate of increase in 32 large and medium
sized cities was even higher at 14.4%. Thus the current
rate of inflation is high, by both China's historical
standards and other major economies' contemporary
standards. But of even greater concern is that the rate of inflation is still accelerating. The June retail price
figure indicated a year-on-year increase of 19%, significantly higher than the average of the first half.
3.
China's rate of inflation should not, however,
be viewed in isolation. It has arisen against the
background of a sustained period of very rapid economic
G.F. 326
CONFIDENTIAL
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