Chinese Premier Wen Jiabao states that inflation is caused by the flood of cheap money from some countries. (My guess would be the US.) He uses the analogy, "Inflation is like a tiger, once set free, it will be very difficult to get the tiger back in its cage." Inflation is up 4.9 percent and 11 percent for food.
Of course, Chinese M2 growth is almost 4 times as large as the US. Even adjusted for growth, Chinese money is expanding faster. If you want to look at the inflation tiger, you do not have to go far from China. What is also clear is that if China does not want to import foreign inflation, it has to allow its exchange rate to appreciate. The Chinese do not want this to occur at any fast rate, so inflation will be domestic problem.
The US is a clear driver with global inflation; however, the inflation tiger is out there but a number of countries have allowed this animal to roam the globe.
The US is a clear driver with global inflation; however, the inflation tiger is out there but a number of countries have allowed this animal to roam the globe.
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