Inflation or Economic Growth?
2008/2/28 15:53:15
What is the biggest issue right now? It is that we must not allow China's economy to fall into a genuine major adjustment. The economy currently faces this fundamental question: do we want inflation or economic growth?
Regarding these two options, there are exactly four exhaustive categories: high inflation with high growth, high inflation with low growth, low inflation with high growth, and low inflation with low growth. Previously, we had been basking in the sunshine of low inflation with high growth, but this state cannot last forever — meaning the other three options could very well become reality.
So what do we fear most? High inflation with low growth — that is the most terrifying scenario. Once this occurs, China's entire social structure will face immense pressure. As for low inflation with low growth, that generally does not occur in developing countries like China. Therefore, the best choice is high inflation with high growth.
In other words, if the bliss of low inflation with high growth cannot continue, we would rather choose high inflation with high growth than ever fall into the dead-end of high inflation with low growth. Put differently, maintaining high growth is the number one priority. Only by controlling inflation on the foundation of sustained high growth can we get it right.
Those attempts to sacrifice economic growth to suppress inflation are not only unrealistic but could very well plunge China's economy into the dead-end of high inflation with low growth. Once economic decision-making goes wrong, adjustments measured in years will follow, and China's great rejuvenation will suffer a devastating blow.
China's current inflation problem is essentially caused by the incomplete and irrational structure of China's existing economy. This has given hostile foreign forces and speculators exactly the opening they need. Look at the massive speculation in all resource-related and even agricultural assets — every single one targets the soft underbelly of China's economy. And who is to blame? A major country that can't even supply some basic agricultural products without relying heavily on imports — how could others not speculate against you?
Last year, when the market was feverishly discussing so-called "excess liquidity," this ID clearly pointed out that this thing simply doesn't exist — it's merely an illusion created by the incomplete structure of China's economy and capital markets. Perfecting the fundamental structure is the real remedy, not the central bank playing that childish game of tilting at windmills. Facts have proven that the central bank's great battle against the windmill of excess liquidity was ultimately a farce. Now, interest rates are already higher than those in the U.S. — let's see how this farce concludes.
All of China's economic problems ultimately come down to structural issues. The solutions to many problems must start from there. Otherwise, showing off fancy spearwork in irrelevant areas produces nothing but farce after farce.
And haven't we experienced enough of such farces?
In one sentence: only when the economic structure is rationalized and economic growth is maintained can inflation pressure truly be resolved — this is the path to a fundamental cure. Otherwise, inflation will be like last year's excess liquidity — the great battle against inflation will end up as another windmill farce, and the final consequences will be something no one can take responsibility for.
Replies
Replies
缠中说禅 2008/2/28 20:45:40
xcdfg,
I've heard your heartfelt words. Be good, okay?
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Who told you to impersonate this ID? Drag them out and behead them!
缠中说禅 2008/2/28 20:31:29
xcdfg,
I've heard your heartfelt words. Be good, okay?