Conflicting Issues in China: Inflation & Economic Contraction

Normally we would consider this a “stagflation” environment. But the economic environment in China is probably not as stable as more mature countries where economic growth is measured in low to mid single digits and higher rates of inflation in upper single digits. 

Recently China put economic growth contracting at 8.1% versus previous readings approaching 9-10%. For them, this is a contraction. At the same time inflation readings have been increasing due in part to widespread property speculation. The current inflation rate in China was recently reported at 3.6% which is slightly below the government’s 4% target. Below is an annual chart of contemporary Chinese inflation data.