mick silver
24th November 2010, 05:25 PM
http://www.thedailybell.com/1549/What-Happens-When-China-Collapses.html ... China Inflation `Volcano' May Prove Too Hot for Controls After Cash Surge ... China's plans to rein in prices include selling state food reserves, stabilizing the cost of natural gas and cracking down on speculation in and hoarding of agricultural products, the State Council said. Standing near his 12-table noodle shop on Beijing's Yonghegong Avenue, owner Liu Heliang says meat and vegetable prices have climbed 10 percent in a year and staff wages are up 40 percent. "I'm struggling to make ends meet with costs going up like this," said Liu, a native of Sichuan province who pays his workers as much as 1,800 yuan ($271) a month, or 88 percent more than the Beijing minimum wage, to serve up a staple Chinese meal. "Raising prices is the only way out," he said, predicting he won't be able to hold out beyond two months. Premier Wen Jiabao's cabinet last week announced it will sell grain, cooking-oil and sugar reserves, ordered an end to tolls on trucks carrying produce and threatened price controls to rein in a 10 percent inflation rate for food. Because the measures would do nothing to counter the 54 percent surge in money supply over the past two years, the risk is they will prove insufficient to cope with the challenge. "They are just not addressing the fundamental problem at all," said Patrick Chovanec, an associate professor at Beijing's Tsinghua University. With the expansion of credit and cash in the economy stemming from China's response to the global crisis, "you're sitting on a volcano," said Chovanec. – Bloomberg