Inflation remains main risk for China’s economy: U.S. economists

Posted on Apr 12, 2011 in AllEconomic News
Inflation remains the main risk for China’s economy this year, U.S. economists said at the Harvard China Forum here on Sunday.

Fred Hu, economist and chairman of Primavera Capital Group, said inflation remains the main threat to the Chinese economy and that China’s monetary policy still has to be biased toward tightening.

Hu attributed the cause of China’s inflationary pressure mainly to the massive liquidity stimulus introduced after the global financial crisis in 2009 and also to rising commodity prices.

Ronald McKinnon, professor of international economics at Stanford University, told Xinhua that the price surge for such commodities as oil, copper and iron is a consequence of the zero interest rate policy adopted by mature economies as the United States and Britain.

McKinnon said these countries’ policy of keeping their interest rates too low is creating hot money inflows into emerging markets including China, causing greater inflation pressure there. “It is very bad for the world economy,” McKinnon said.

To tackle rising inflation in China, Hu said China’s central bank should continue to tighten its monetary policy as it has done since last autumn.

McKinnon said it would be helpful if the U.S. joined other countries in monetary tightening and raising interest rates.

Inflation remains main risk for China’s economy: U.S. economists – People’s Daily Online.