China's Growing Inflation Woes

Via Bloomberg:

"Inflation accelerated to a more-than-forecast 1.9 percent in December and gross domestic product climbed 10.7 percent, the National Bureau of Statistics said in Beijing yesterday"

This is after a $586 billion stimulus package designed to help consumer purchases. With rising growth, inflation can become a potential risk. A fourth quarter survey of 50 Chinese cities showed that 46.8% of consumers said prices were "too high to accept." The response by Chinese government officials has been predictable. They're talking about raising interest rates and required reserve rates in order to trim the money supply and control liquidity. This policy may also have a minimal affect on Chinese GDP going forward. The spillover of this affect could be more significant abroad than it is in China because, as of now, the world is relying on Chinese growth to help it recover from a global recession. The good news is there's been talk of a possible appreciation of the yuan, a mild 3%, but something is better than nothing at this point. Any appreciation of the yuan will help international competitiveness and fuel international growth.