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BasicInformationCausesEffectSolutionOutlineConclusioninflationdefinitionmeasuresStatusquoofchina’sinflationInflation:SituationthatwidespreadpriceincreasesoccursthroughoutaneconomicsystemHighratesofinflationandhyperinflationLowandmoderateinflationMeasures----inflationrateP0:currentpricelevelP-1:pricelevelayearago1.ConsumerPriceIndex(CPI)消费者物价指数2.PersonalConsumptionExpendituresPriceIndex(PCEPI)个人消费支出价格指数3.GDPdeflatorGDP平减指数(GDP缩减指数)Broadpriceindices(CCI)路透CRB商品指数2.ProducerPriceIndex生产者物价指数(ECI)雇佣成本指数=41d6add188d554d2’sinflationChina’sinflationratefrom1980to2011蒜你狠豆你玩姜你军猪你涨PriceincreaseinconsumergoodsandenergyChina'sunprecedentedrateofdevelopmentChinesegovernmentsstrictcurrencycontrollargecurrentaccountsurplusHigherdemandandpoorharvestsothercommoditiesareincreasinginpriceinfluxofforeigndirectinvestmentChina'sunprecedentedrateofdevelopmentChinesegovernmentsstrictcurrencycontrolhighsavingsrateandextensivelendingHowinflationaffectChineseeconomy?HowinflationaffectChineseeconomy?OpportunityRebalancetheeconomyRiskOutofcontrolRebalancetheeconomy:Inflation≠reducingrealpurchasingpower.Isinflationabadthing?Inflationisnotabadthing.RebalancetheeconomyChina’sinflationrateiscomparativelylowforadevelopingcountry.RebalancetheeconomyBoostingconsumptionWagesoutpaceproductivityToolittleconsumptionOutofcontrolUnemploymentRisksofsocialinstability.Howdoourgovernmentdealwiththeinflation?MonetarypolicyFiscalPolicyWagesandpricecontrolAnappreciationinRMBOutlineIncreasinginterestratesSlowingtheriseinthemoneysupplyMonetarypolicycancontrolthegrowthofdemandthroughanincreaseininterestratesandacontractionintherealmoneysupply.Forexample,Chinahasraisedinterestrates4timesin2011inordertoattempttoreduceinflationarypressureintheeconomy.MonetarypolicyTheeffectsofhigherinterestrates.Higherinterestratesreduceaggregatedemandinthreeways;•Discouragingborrowingbybothhouseholdsandcompanies•Increasingtherateofsaving(theopportunitycostofspendinghasincreased)•Theriseinmortgageinterestpaymentswillreducehomeowners'real'effective'disposableincomeandtheirabilitytospend.IncreasedmortgagecostswillalsoreducemarketdemandinthehousingmarketHigherdirecttaxes(causingafallindisposableincome)LowerGovernmentspendingAreductionintheamountthegovernmentsectorborrowseachyear(PSNCR)Thesefiscalpoliciesincreasetherateofleakagesfromthecircularflowandreduceinjectionsintothecircularflowofincomeandwillreducedemandpullinflationatthecostofslowergrowthandunemployment.FiscalpolicyAnothermethodattemptedinthepasthavebeenwageandpricecontrols(incomespolicies).Ingeneralwageandpricecontrolsareregardedasatemporaryandexceptionalmeasure,onlyeffectivewhencoupledwithpoliciesdesignedtoreducetheunderlyingcausesofinflationduringthewageandpricecontrolregime.WagesandpricecontrolAnappreciationintheRMBmakesChineseexportsmoreexpensiveandshouldreducethevolumeofexportsandaggregatedemand.ItalsoprovidesChinesefirmswithanincentivetokeepcostsdowntoremaincompetitiveintheworldmarket.AstrongerRMBreducesimportprices.Andthismakesfirms'rawmaterialsandcomponentscheaper;thereforehelpingthemcontrolcosts.GiventhattheRMBexchangerateiscontrolledbytheChineseGovernmentthiswouldbeaneffectivepolicytool,butthecostmaybefeltbyexportersandthereforeintermsoflowereconomicgrowth.AnappreciationinRMBLong-termpoliciesLabourmarketreformsSupplysidereformsTheweakeningoftradeunionpower,thegrowthofpart-timeandtemporaryworkingalongwiththeexpansionofflexibleworkinghoursareallmovesthathaveincreasedflexibilityinthelabourmarket.Ifagreateroutputcanbeproducedatalowercostperunit,thentheeconomycanachievesustainedeconomicgrowthwithoutinflation.AnincreaseinaggregatesupplyisoftenakeylongtermobjectiveofGovernmenteconomicpolicy.Howdoodinarypeopledealwiththeinflation?ToliveafrugallifeManagementInvestmentWilltheinflationrateincrease？Willthepriceremainstable?FutureExpectationInflationwillfallalthoughvolatilepricesremainvulnerabilityUpwardpressuresonthecurrencyhavediminishedrecentlyChinastillhasalongwaytogoFutureexpectationEconomictargetsChina's12thfive-yearplansupply-drivenfoodpricewillcontinuetobevulnerable•Upwardpressuresonthecurrencyhavediminishedrecently.•TheRenminbiappreciatedbyaround6percentinrealeffectivetermsin2011.Atthesametime,thepaceofreserveaccumulationhasfallenduetomultiplefactorsincludingasmallertradesurplus,higherglobalriskaversion,andvaluationeffectsassociatedwithastrongerU.S.dollar.However,giventhecurrentaccountstillhasasizablesurplusinU.S.DollarsandFDIremainsstrong,thepaceofreservesaccumulationshouldresumethisyear.ChinahasalongwaytogoTheuncertainglobaloutlookAsidentifiedinthelatestGlobalFinancialStabilityReportUpdates,theglobaleconomyisataprecariousstageand