Inflation not a concern in the short term

A series of recent developments, including soaring international crude oil prices in the first half of this year, the spread of swine fever in northern China, floods in Shouguang, Shandong province, and the rapid rise of house rents in the first-tier cities, have sparked market concern over stagflation.

Stagflation refers to a combination of stagnation and inflation. The inflation rate is high, the economic growth rate has slowed and unemployment remains relatively high. Which have put economic policymakers in a dilemma, as the measures to lower inflation may exacerbate unemployment, and vice versa.

But China should not worry too much about stagflation in the short term, at least till the first half of 2019. The consumer price index (CPI) may have risen from 2.0 percent to about 2.5 percent, but it is unlikely to increase to 3.0 percent.