巴西记者采访：中国通货膨胀问题

What are you estimates for China’s inflation rate this year and next?

Xu Hongcai: This year, China’s inflation rate is likely to be 4%~5%, and a similar rate next year. The fundamental reason is that a new round of rise in prices of China’s economy has been featured by cost-driven and imported inflation. However, the easing monetary policy implemented by the Chinese central bank is the root of today’s inflation since the last global financial crisis.

Is inflation still the country’s main challenge in a near future? Will the government be able to bring it down?

Xu Hongcai: Definitely. Under the pressure of wage increase, RMB appreciation and the global excessive liquidity, China’s inflation is probably a long term phenomenon. If developed countries still adopt zero interest rate policy, China and other emerging economies will have to face serious challenges in controlling inflation and property bubbles.

What will be the consequences for China if the current rates do not slow down? And how will it affect other countries?

Xu Hongcai: If the inflation rate remains at a high level, the living cost of Chinese citizens will increase that erodes their wealth. Also, the production cost of enterprises is going to rise and hence lower their revenue. As a result, China’s economic growth will slow down with a higher unemployment rate. This will definitely lead to a negative effect on other countries because China’s economy has been one of the engines of the world economy.

What are the other choices for the government to control the inflation in the country?

Xu Hongcai: The moderate tight monetary stance is necessary to fight inflation in China. There are a few more options such as increasing the supply of commodities, improving productivity and enhancing technology. Nevertheless, government should pay more attention on decreasing taxes of enterprises and citizens, especially building the mechanism of linking wages to inflation and increasing subsidies of low-income households.

Little by little the yuan is getting stronger. Do you think that at some point this year this process will speed up or not?

Xu Hongcai: As China’s economy has remained remarkable growth momentum, RMB has been getting stronger and becoming an international reserve currency. I believe this trend will continue, but this does not mean fast appreciation. In fact, since the June of 2010, China’s monetary authority has promoted to reform the formation mechanism of RMB exchange rate and improve its flexibility. China will maintain the policy of gradual appreciation for stable and sustainable economic development. Therefore, I didn’t foresee any reason for RMB to speed up appreciation.

Compared to other BRICS members, how is China’s situation?

Xu Hongcai: At present, the BRICS countries have been facing five common problems that are associated with the large income inequality, the low industrial structure characterized by the resource-intensive and labor-intensive industry, the imperfect social security system, the inflationary pressure, as well as the volatility of short-term international capital flow. Comparatively speaking, the rise in international commodity prices and the decline in external demand have impacted on China’s economy more significantly than on other BRICS countries because China has been involved in intensive foreign trade activities.