China: Inflation out of control?

Alarming statistics coming out of China

Prices led by food have caused inflation rates to leap to a two year high
May inflation results suggest inflation grew at an annual rate of 3.4%, ahead of analysts expectations and up from 3% in April.

Food prices up 8.3% vs. last year
-Pork prices up 26%

The higher than expected inflation is causing investors to take their money from 2.5%-3% deposits and put into the market for bigger returns. House of cards to say the least.

Interest rates in real terms are now negative.


The Central Bank of China looks is expected to move quickly (for the 3rd time this year) to raise rates to fight back inflationary pressures. The magnitude of the increase might spook Shanghai investors and ultimately US markets.

On the positive side, prices remained muted excluding food items.

DB