“China’s electricity demand is running so far ahead of supply that it is expected to be short of 30-40 gigawatts of power capacity this summer, twice the deficit caused in Japan by the earthquake and tsunami on March 11.”

China is hiking rates by 3% for some users in an apparent effort to cool demand and/or encourage the production of more supply. It is feared that increases in supply will only further drive up the price of coal and offset any profits power companies would have otherwise earned.

The post China hikes electricity rates for the first time in two years appeared first on Inflation Watch.

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.

The post China’s inflation could be worse but stimulus money sitting in investments, not consumption appeared first on Inflation Watch.

“Economists blame China’s inflation on the dual pressures of consumer demand that is outstripping food supplies and a bank lending boom they say Beijing allowed to run too long after it helped the country rebound quickly from the 2008 global crisis.

Attempts at price controls, subsidies for the poor and orders to local leaders to guarantee adequate vegetable supplies have had mixed results.”

The failure to control inflation to-date is forcing China to allow the currency to appreciate faster. The near-term increases still seem modest at 5% (against the dollar), so it will be interesting to see whether China continues pushing harder on non-currency methods.

China’s currency is not traded on open markets, but if it were, it seems the currency would soar given current conditions.

The post Inflation may be forcing China to let its currency appreciate appeared first on Inflation Watch.

“The ongoing rise in China’s inflation rate is making headlines today, but U.S. inflation is not too far behind, as this chart shows. It’s not surprising that inflation should be moving higher both in China and the U.S., since China has essentially outsourced its monetary policy to the U.S. Federal Reserve by pegging the yuan to the dollar. Chinese inflation is somewhat more volatile than ours, and that is also not surprising since its economy is smaller and less burdened by long-term supply and labor contracts. If China has an inflation problem, then so does the U.S. It will just take longer for the problem to become obvious in the U.S.”

This piece is a must-read.

Disclosure: author is long TIPS

The post Looking at CPI from all angles suggests an imminent problem appeared first on Inflation Watch.

Yesterday, China’s central bank increased interest rates for a fourth time in six months.

The post Still room for more rate hikes in China appeared first on Inflation Watch.

The article notes several measures Chinese authorities are taking to curb inflation, everything from increasing food supplies, reducing transportation costs, and controlling the money supply and bank lending. These measures seem to be working, but the Chinese are not declaring victory just yet…

The post Battling inflation is a top priority in 2011 for China appeared first on Inflation Watch.

The post China tightening cycle hits its third rate hike appeared first on Inflation Watch.

The post China’s holiday greetings: a 25 basis point rate hike appeared first on Inflation Watch.

A survey conducted by China’s central bank reveals troubling trends in inflation expectations amongst the Chinese people on the heels of the biggest increase in price levels in 28 months and food costs soaring 12%:

“A price satisfaction index fell to 13.8 this quarter, the lowest level since data began in the fourth quarter of 1999, the central bank said on its website today.

In total, 74 percent of households considered prices too high, up 15.6 percentage points from the third quarter, the central bank said. Its fourth-quarter survey was of 20,000 households in 50 cities.

Inflation expectations are ‘intensifying,’ the central bank said, with 61 percent expecting price gains in the next quarter. In the previous survey, the proportion was 46 percent.”

The post Inflation Expectations Are Not Contained in China appeared first on Inflation Watch.

“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.”

“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.”

It seems consumption is declining in the wake of this inflation, but not fast enough to cool prices down. The Chinese government is worrying even more about what will happen to the many millions of poor people who may no longer be able to afford the little food that they currently consume.

The post China continues to lose its fight against inflation appeared first on Inflation Watch.