The inflation report, and other economic data released in recent weeks, point to one of the central challenges now facing Beijing policy makers: how to prevent soaring food and property prices from creating social problems and undermining the nation’s economic boom.
The decision was meant to force borrowers to pay more interest and to provide higher interest rates for savers. The government has indicated it hopes the decision will slow property purchases and encourage people to keep money in the bank rather than spending and driving up inflation.
But some analysts say the initial move may not be enough. While consumers are benefiting from strong economic growth, with the nation’s gross domestic product moderating from about 10.3 percent in the second quarter of this year, they are increasingly anxious about rising prices for a wide variety of goods.
According to the article, China's labor force has seen a dramatic decrease in the purchasing power of their salaries due to the effects of high inflation. The lack of purchasing power is made apparent when consumers attempt to purchase food and property prices; however, the effects of inflation have poured into other industries like clothing and shoes.
ReplyDeleteTo combat this, China's Government has increased interest rates in hopes that consumers will decide to save more money in the bank. I think this is a good decision, but is this enough to prevent the economy from overheating is the question. If it works as planned, consumers will spend less which will keep inflation from steadily increasing, and as a result, purchasing power will likely increase.