It’s The Interest Rate

When the official figure of CPI in China reached 3.5% in August, the actual return on the fixed deposit is, again, negative. I believe that the actual CPI must be much higher than 3.5% because everybody knows that the official figures are systematically manipulated by the department of statistics of the central government. The actual CPI could be 9%. Anybody holding cash has been actually losing value quickly. That’s why the prices for agriculture products are taking turns to shut up drastically and finally the inflated share prices under such uncertain circumstance, and even the property prices which suppressed by the most serious government policy aiming at putting property speculation under control for the past 5 months.

It’s obvious that raising the interest rate is the only effective way to kill the inflation. Otherwise, people having little assets are standing to lose. But the Chinese government is still not doing the right thing, which had been done by the central banks in India and in Russia. Do you know why? The largest owner of various assets and borrower of “people’s money” (RMB) is the Chinese government and the state owned enterprises.

Be very cautious at the rosy figures released by the Chinese government. The next thing China is going to export is inflation!