May 12, 2008 | posted by Michael Baxter in China |

In the year to April, China’s consumer prices rose by 8.5 per cent, the highest rate since 1995.

Food inflation gave the biggest concern, with food prices up a worrying 22 per cent. The jury is still out on whether the recent rises in inflation will remain a threat in the long-term.

Many argue that the price rises are down to one-offs, and will fall back. On the other hand, when an economy expands by 10 per cent year in, year out, as China has been doing, then you would expect inflation, sooner or later.

China’s inflation would reduce if the government agreed to do what US politicians want, and allow the yuan to appreciate more rapidly.

On the other hand, this will lead to escalating prices in the US.

The irony of it all is that should US politicians get their wishes, it will be China, and not the US who will benefit.