Chinese Inflation Rises

The Chinese National Bureau of Statistics reported Wednesday that inflation rose in the world’s second-largest economy in January. Consumer prices were up 4.5 percent as compared with a year earlier, up from a 4.1 percent inflation rate in December. At the beginning of last year, China considered it a top priority to keep inflation in check through higher lending requirements for banks. These requirements made it more difficult for investors to buy multiple homes, which drove up home values in the nation’s largest cities.

Those policies appear to have worked, as inflation was a staggering 6.5 percent in July, and has been gradually decreasing ever since. Of course, the slower inflation has been accompanied by a slowdown in overall economic growth, as declining European demand for Chinese products drags on the economy. With the current climate, some economists are predicting that the People’s Bank of China will take some action to stimulate the economy, either by lowering interest rates or reducing reserve requirements for bank, which would free up financing and likely push investors to begin buying homes again.

Wednesday’s report also showed that food prices, which make up roughly a third of the overall inflation measure, rose 10.5 percent in January in year-to-year terms. While that sounds like a massive one-year increase, July’s report showed a 14.8 percent rise in food prices as commodities soared during the summer months.

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