Beijing has long history fighting inflation

Chinese leaders are trying to shore up slowing growth by loosening lending curbs imposed to cool an overheated economy and inflation. But they are moving cautiously for fear of reigniting a price spiral.

Some of the challenges Chinese leaders have faced and their responses:

— 1989: Inflation spikes to 18 percent, adding to public frustration that helps to fuel the Tiananmen Square pro-democracy protests. The government's military crackdown on protests plunges China into international isolation, causing economic growth to plunge to 3.8 percent in 1990 while inflation falls to 3.1 percent.

— 1994: Inflation soars to 24.1 percent while economic growth is just 4.1 percent, eroding gains that underpin the Communist Party's claim to power. A former Shanghai mayor, Zhu Rongji, is put in charge of taming prices. He imposes price controls and clamps down on lending to state companies. Inflation falls to 2.8 percent by 1997, winning Zhu a reputation as China's leading reformer and appointment the next year as premier, its top economic official.

— September 2008: After inflation rises to a decade high of 6 percent, Beijing responds by freezing prices of electricity and some other goods. That backfires when utility companies respond by cutting coal purchases. Power stations run out of fuel when freak snowstorms hit in January, leaving wide sections of southern China without power in freezing weather.

— February 2008: Inflation jumps to a 12-year high of 8.7 percent, driven by a 23.3 percent surge in food costs. The government expands price controls and tries to boost food supplies by cutting import taxes.

— November 2008: Inflation subsides to 2.4 percent. Exports decline for the first time in seven years as the global crisis cuts demand. Regulators ease lending curbs to avert an abrupt growth slowdown and possible unrest.

— Nov. 9, 2008: The Cabinet announces a two-year, 4 trillion yuan (US$586 billion) stimulus to fend off the crisis by pumping money into the economy through public works spending and other initiatives.

— Nov. 26, 2008: Beijing responds to weakening global demand for Chinese goods by slashing interest rates by 1.08 percent points to 5.58 percent, its biggest single reduction in 11 years.

— 2009: Amid a wave of millions of job losses in export industries, China's annual economic growth falls to 9.6 percent from 14.2 percent in 2007.

— Jan. 20, 2010: While the United States and other Western governments struggle to shore up anemic growth, Beijing declares China has recovered from the crisis after its own expansion accelerates to 10.7 percent in the final quarter of 2009.

— Oct. 19, 2010: Beijing raises interest rates for the first time since the crisis, hiking the charge for a one-year loan by 0.25 percentage points to 5.56 percent. That is followed by four more gradual increases over the following year.

— July 2011: Inflation rises to 6.5 percent, fueled in part by the flood of government spending and bank lending. Food costs, which account for up to half of spending for China's poorest families, rise 14.8 percent over a year earlier.

— December 2011: Economic growth falls to a 2 1/2-year low of 8.9 percent. Inflation eases to 4.1 percent, though food costs jump 9.9 percent.

— Jan. 8, 2012: Premier Wen Jiabao promises measures to help struggling entrepreneurs who have been battered by weak demand. But the central bank says most lending controls will stay in place to cool housing prices and keep inflation in check.

— January 2012: Inflation rebounds to 4.5 percent, driven by a 10.5-percent rise in food costs.

Subscribe to The China Post and save 25%. Click here

PrintEmail

Write a Comment

Terms

Enter your comments - 3000 characters max

Type in image code

Submit

 Receive China Post promos
 Respond to this email