Sinoconomist

The Chinese set great store by the significance of numbers. Today, the importance of the number eight was obvious to even the most numerically-challenged at the launch of the spectacular ceremony to open the Beijing Olympics. Festivities kicked off at the auspicious time of eight minutes past eight on the eighth day of the eighth month of the eighth year of the new century.

For Sinoconomists and number-obsessed analysts the number eight has had an alternate resonance. Inflation as measured by the CPI index has hovered around the eight per cent level for much of the past year. Quite rightly, this has been a cause for concern and debate. Concerned government officials have (wrongly in my view) enacted price controls to cushion the populous from inflationary effects, academics and China-heads have debated underlying causes and explanations.

Away from the focus on one number, important dimensions are being ignored though. Average figures for consumer price inflation are widely reported and mulled over, yet the very real and significant variations in inflationary conditions within China are overlooked. Inflation levels in poorer provinces such as Xinjiang and Gansu have been running at and have consistently hovered around the 12-13% mark over the past year.

These provinces have the lowest levels of income and yet suffer the highest rates of inflationary pressure on basic consumption goods. In this context these alternate numbers also mean a lot. Now more than ever we are confronted with an image of ‘One-China’. This image is not realistic; there exist many states within one-centrally controlled entity. Each area has respective peculiarities important to consider before making an economic analysis.

To understand the significance of inflation in China we must cast our gaze away from narrow measurements and understand the very real variations which exist across space. By doing this we will forge a more prescient understanding of this continually perplexing country and understand both the severity of social problems and the difficulties associated with implementing an economic policy in such a wide and varied country.