Science Leadership Academy

I was looking through my RSS feeds earlier today --since I hadn't checked up on them in some time-- and found several articles relating to China's economic growth and risks, and articles about precious metals. Under the headlines, sentences were pulled from the articles to give an idea to the viewer what it's about. I saw a couple of headlines about China like this; "China Sees Inflation Pressure Growing: ...is confident inflation can be held to its 4.8 percent target this year, financial officials said Thursday. "We will face increasing pressure for price rises...” and one other read, "China's Premier Discusses Economic Risks: ...From both inflation and a global economic slowdown, sounding a cautious note as he begins his second term." The headlines for the precious metals were different, due to the change of subject. I looked at two, which read, "Gold, Platinum Hit Record Highs: ...concerns about inflation and energy supplies spurred a continuing flight into hard assets." And the second one, "Precious Metals Fall Despite Dollar Drop: Precious metals prices fell sharply Thursday, ignoring a tumbling dollar and spiking crude prices after South Africa said it would ease power rationing for some of the world's biggest gold and platinum mines. Other commodities traded mixed, with crude..."

Those were the first headlines I saw when I scrolled about a third way down the first page of feeds. I scrolled down even more, and --no kidding-- saw another dozen articles about China's economy. Since China was the subject of the week, I decided to read up on several of the articles.

This article explains China's economic pressure, due to food shortages and a credit boom. "Inflation 'will be the No. 1 item on our agenda,’ we have the means to achieve the targets." the chairman of China's planning agency, Ma Kai, said. China's inflation rose to 7.1% in January, it's highest in 11 years. One of the problems Communist leaders worry about is possible political fallout from rapid price rises, especially for food that has battered Chinese consumers and threatens to erode rising living standards. Bouts of high inflation in the 1980s and '90s sparked protests. Ma believes that the government is too optimistic, and that the government is still underestimating the risk of inflation.

I thought it was very interesting how Ma said that inflation would be the No. 1 item on their list. In the United States, the Fed is cutting interest rates as their priority, instead, the Fed seconded inflation. Economists in the United States believe that the Fed should fix inflation first, rather than cutting interest rates. I wonder how China's economy will play out compared to the United States since they're trying to fix inflation first instead of other less severe economic issues. We'll have to wait and see how everything plays out. Then, we'll be able to tell whether cutting interest rates was a better idea, or fixing inflation was a better idea.