China’s inflation could be worse but stimulus money sitting in investments, not consumption

Nightly Business Report produced a short video segment describing China’s inflation woes (transcript included) called “China’s Inflation Battle.” The commentator identifies China’s RMB¥ 4 trillion stimulus program (about $585B USD at the time) as the original source of the inflation and takes us to Pengshui, 1000 miles from Beijing, to see some of the examples of how inflation is impacting the lives of the average Chinese person.

The most interesting quote came from Associate Professor Patrick Chovanec of Tsinghua University, School of Economics and Management:

“When you see over 50 percent growth in the money supply, the question isn’t, why is there inflation? The question is, why isn’t there more inflation? Why haven’t we seen it sooner? The reason is because a lot of that money didn’t go into a consumption boom. It went into an investment boom.”

It is a scary thought to think inflation problems could (will?) get even worse once the Chinese figure out how to make use of all this massive investment.

http://www-tc.pbs.org/video/media/swf/PBSPlayer.swf

Watch the full episode. See more Nightly Business Report.