中国国内的通货膨胀问题

What appears like at the moment is the Chinese authority seems to be taking action or focusing their action on food prices? The inflation soar is much bigger than just food, isn’t it?

Oh yeah, indeed. But however, the food prices is rising by 10% which is much more than the headline figure 4.4%. And the reason why the Chinese government is actually so interested in inflation is that it was actually for public and one of the major cause. That caused 89 protests.

The Tiananmen square protest.

Because I mean one of the big reasons is food actually account for almost close to 40-50% of the Lower income families' expenditure.

OK.The authority is targeting that because it is politically sensitive but there are other fires to put out if you like coming. One of them obviously there's been a massive amount of bank lending. I mean there has been huge amount of cash flooding through the economy. Is the government do you think going to have to raise interest rate to try and cut back on the spending, on the borrowing?

Well they are actually doing something other than the interest rate Itself. I mean they are raising the required reserve ratio. Because in China it is actually quite difficult to raise the interest rate very dramatically as we.

Why?

The primary reason is because that is going to attract even bigger inflow of capital.

Which will put more pressure on the currency?

The currency and that's probably the currency is probably lesser a concern but the asset bubble itself is probably much more a serious concern because that will create a hate major wealthy effect that will increase consumption.

Ok. So, Can the government in European Union effectively combat fighting inflation without raising the interest rate dramatically?

I think so if they are determined enough.

And what makes you think that they would or would not be?

I think they would have to because.

Sorry. Let me just move on to that. Is that going to mean a sharp economic slowdown or we've got to that stage where it's inevitable?

I think we have got to the stage that is evitable. I mean in shorting. So I hope that is the case. The trouble is that if the cities themselves are having some troubles, it is probably quite ok but if there is a worldwide, there is a countrywide problem of poor class having major problems in dealing with the inflation. I think that would be the major instability. The Communist Party, my belief is that will do everything to stop that happening. Stability is the primary concern.