Inflation might not be the major threat for China in 2011 that many think, believes Mark Williams, senior China economist at Capital Economics.
He acknowledges rising prices are a big concern for many Chinese households, particularly when food prices are rising. But he points out the poorest families are also often food producers. “For many of them, incomes go up as food prices rise. Indeed, food price inflation is one way to transfer income from better-off urban households to those in rural areas. Inflation will only become a problem if it spreads beyond food, but there is little sign of that at the moment.”
He says problems faced by poor families in urban areas when food prices rise should not be overlooked, but notes the government is helping low-income households by boosting income subsidies.