The Big Call

Inflation to return, but gradually

  • Published 10 Jul 2009

Will the surge in money supply in the first half lead to the type of inflation that forces the central bank to hit the brakes later in the year?

Much of the impetus behind China's growth rebound since the start of the year has come from an extraordinary bout of monetary easing. Liquidity has been an important driver behind the surge in both real estate and stock prices. New lending totalled Rmb 5,840bn ($854.6bn, €614.1bn, £531.5bn) in the first five months, and may have expanded again in June by over Rmb 1,000bn – meaning that the government's full-year loan growth target of Rmb 5,000bn has already been vastly exceeded.

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