The economy in China is starting to fall due to inflation rates. This sounds nearly impossible since the central bank reported their GDP last year at 180% and other, third party, sources report as high as 215% increase in GDP. Although GDP is extremely high, we can see that due to the prices of housing are slowing and exports are decreasing. In addition, forecasters were inaccurate in saying that output would grow by 9.5% when in reality it has only grown by 8.6%. The real problem, however, is the issue of inflation. It was expected to have increased by approximately the same amount as previous years (3%), but it only increased by 2%.
Economists have analyzed this by comparing how much one spent in 2006 versus how much was in 2008. The idea is to take figure how much someone would have in 2006 and convert that to 2008 dollars. When economists went back to double check how the figures turned out, they learned that people were actually spending a higher percentage of income on food in 2008 than in 2006. This means that those that were thought to have the same amount of money in 2008 (due to inflation), actually did not. By going back and checking these figures, we learn that the inflation rates were off. This is partly due to the fact that the cost of living increased faster than expected.
While inflation is only one part of the issue with China's economics, it is a crucial part as it seems the Chinese government lied about the inflation rates for no rational reason. The first part, in my opinion, to fixing this economy is for the government and central bank to report accurate numbers so that economists can give solutions to these issues.
http://www.economist.com/news/finance-and-economics/21599051-chinas-official-figures-both-understate-and-overstate-inflation-alternative-view
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