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The understated inflation

Updated: 2011-03-10 11:19

(chinadaily.com.cn)

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Comment on A slowing Chinese economy? (March 10, 2011)

For being a professor, Barry Eichengreen has a very simplistic outlook on the Chinese economy. There is a lot more involved in the "slowing down of the Chinese economy." Other factors are forcing the Chinese to slow down, one of which is inflation.

The stated inflation number is far different from the "felt" inflation number on the ground here in Beijing. A reduced GDP would help deal with that.

However, there are two camps within the Chinese economy. The old camp that wants to focus on GDP growth as a measure of China's overall economy, and a new camp of real economists who want to see China's growth measured in something more accurate.

So far the GDP kings and queens are winning, as we can see from the GDP numbers of last year. But the way they measure the GDP is flawed, as they rely on local governments (typically not having the best educated officials in China) to report on their local GDP growth.

Too many people think the high GDP in China is something great. It is not. It is scary for those who face inflationary pressures everyday. (I am speaking as one who makes quite a bit every month. I can't imagine those who make less than 2000 a month in beijing. What do they do?)

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