Rising+Inflation+A+Top+Chinese+Concern+-+Aria

= = Rising Inflation A Top Chinese Concern - Aria
 * CNN: []
 * February 18th, 2011
 * **Summary:** Recently in China, rising inflation has become a top concern. For example, the consumer price index (CPI), a gauge of inflation, has hit 5.1% in November 2010, despite the efforts of the government to keep it at 3%. This may not seem so severe, however its food component is soaring at around 10%, with certain items soaring even higher. Some food necessities, such as wheat, have risen in price by as much as 33%. Some local food vendors have tried "tricking" consumers by keeping their prices the same, but lowering the amount of food that they sell in one serving. China's famous cup noodles, for example, have decreased in weight from 95g to 85g, but their price remains the same. One such cause of this significant growth in inflation is the expansion of China's money supply, which has risen by over 50% in the past 2 years. The chinese government is desperately trying to keep this problem under control by offering subsidies to farmers, and imposing price controls on scarce goods and government services. However, these tactics cannot battle the droughts that have hit central china, causing their wheat supply to decrease by over 15%. These tactics are definitely slowing down the inflation rate, but will not completely stop it.
 * **Vocabulary:**
 * **Supply:** The entire relationship between the quantity supplied of a good or service and its price.
 * **Supply Curve:** A graph showing the relationship between the quantity supplied and the price of a good or service, holding everything else constant.
 * **Demand:** The entire relationship between the quantity demanded of a good or service and its price.
 * **Demand Curve:** A graph showing the relationship between the quantity demanded and the price of a good or service, holding everything else constant
 * **Buffer Stock Scheme:** When commodities are bought and stored when there is a surplus in the economy and are sold from these stores when there are shortages in the economy
 * **Subsidy:** A form of financial assistance paid to a business or economic sector.
 * **Graph:**
 * **Evaluation:** The article mentions that China's money supply has increased by over 50% in the past two years. This is a significant contributor to the rising inflation. Of course, as shown from the graph above, offering subsidies to farmers and imposing price controls MAY work for certain small products, such as the growth of corn, but in the long run, a major solution is needed. One severe problem in China is that banks freely loan people money, and over time this has shown to increase the GDP per capita of the country. This causes the average person to be more wealthy and demand more food while supply stays the same, thus causing a shortage. China really needs to increase its interest rates in an orderly fashion, control its money supply, and control bank lending in order to control this inflation. However, it must not be too severe in these cases as it may trigger a recession and cause even more problems.