Has China tamed inflation?

24th June 2011

This is the key paragraph:

"There is concern as to whether China can rein in inflation and sustain its rapid development. My answer is an emphatic yes. Rapid price rises pose a common challenge to many countries, especially other emerging economies and China. China has made capping price rises the priority of macroeconomic regulation and introduced a host of targeted policies. These have worked. The overall price level is within a controllable range and is expected to drop steadily."

On Marketwatch, they are not so sure. It quotes Bank of America Merrill Lynch economist Ting Lu who cautions against reading too much into the statement.

The report notes that comments by Wen to domestic officials on June 13 had a similar theme but a much different tone, emphasizing difficulties and downplaying achievements, whereas Wen's Friday editorial seemed intended to express confidence to the world.

It says readers should take the editorial with a "grain of salt. Lu added: "Despite these positive messages from Wen, it could be wrong to expect the Chinese government to change its policy stance soon."

On Business Insider earlier this year, Patrick Chevanec relates his view that it is not interest rates but currency appreciation that China needs to fully tame inflation.

But China continues to take action. The Hong Kong daily, the South China Morning Post reports here on China reiterating a warning to banks to curtail lending to property  developers.

Finally to get both sides of the argument, here is a CNBC Squawk box video  discussion with a bearish Diana Choyleva, director at Lombard Street Research and a bullish Richard Kang, CIO & director of research at Emerging Global Advisors.

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