China's fear of Inflation!

Jan 31st 2008

Efforts to cool the economy may undo crucial reforms
Faced with rising consumer prices and signs of runaway growth.

The Chinese Communist Party in November issued a strongly worded statement vowing to stem inflation and slow investment.

At the time market players paid scant attention to it. But as the State Council's increasingly stringent policies show no signs of letting up even in the face of global financial turmoil, players in China's property and equity markets are at last waking up to the harsher reality.

In recent weeks both housing and stock prices have started to retreat from their irrationally exuberant highs.

Chinese policymakers, however, should be careful of what they wish for.

Falling asset prices could bring back an old problem that many thought had been conquered: bad debts in the banking system. Meanwhile, inflation is reviving throwback elements of state economic planning.

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As many people know China's economy is in a massive boom and growth had been through the roof, but the chinese government is fearful, they are afraid of inflation, which could set back they're recent economic boom back dramasticly stock prices have begin to fall as well as the housing market inside China, The China blog will be watching this situation very carefully in the coming months and will report back.

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