PRC: The Price is Right, But Not For Long
It had to happen. Even China is feeling the pinch of the impending global downturn. It's just put up fuel prices by 10%, and the price of pork rocketed this year too. Inflation is at record highs, 6.5% or so.
It's bizarre to think of what is still very much an authoritarian state dabbling in monetary policy, but globalisation may well be revealing the sting in its tail for Beijing. Part of the reason for the high oil prices is the weak dollar, itself due to an extent to the basically false valuation of the RMB. And it's not China's fault that the price of oil is so high these days, blame that on the US too. But a combination of all these factors is going to hurt Joe Zhao in the pocket, and that's a recipe for unrest.
Let's not forget that the protests in Burma were sparked by a fuel price rise, and inflation was a factor in the Tiananmen uprising too. When the inevitable global economic meltdown occurs any time soon, things are going to get even tougher as Chinese businesses lose orders and customers, forcing wage cuts and unemployment. Expect some very worried faces in the Great Hall of the People - the People may just begin to stir.
BBC NEWS | Asia-Pacific | China's fuel dilemma
The country's booming economy is sucking up crude at record rates and China is now the world's second largest consumer of oil after the US.
Net imports in the first eight months of this year soared by nearly 20%.
Beijing exerts a tight control over the yuan
But rising fuel prices may have created another economic headache.
They are likely to add to soaring inflation which in August hit a 10-year high of 6.5%.
The central bank has already raised interest rates several times this year and another hike is likely before the end of the year.
Many analysts think that the increases are still not enough to curb inflation.
The government worries that inflation could lead to social unrest - rising prices were one of the factors in the run-up to the Tiananmen Square protests in 1989.
