China’s New Inflation Constraint
Today, for a given rate of GDP growth in China, the corresponding inflation rate is substantially higher than it was over the past two decades. In other words, inflation has become an important constraint on policymakers' efforts to return China to a path of rapid growth.
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BEIJING – China’s economic-growth rate slowed in the second quarter of this year to 7.5% year on year, down from 7.7% in the January-March period, in line with Chinese economists’ forecasts in recent months. At the start of 2013, however, economists – both at home and abroad – were much more upbeat about the prospects for Chinese growth. So, what changed?