China Going Back To 2011

The enormous setback hadn’t yet been fully appreciated in March 2012 when China’s Premier Wen Jiabao spoke to and on behalf of the country’s Communist governing State Council. Despite it having been four years since Bear Stearns had grabbed the whole world’s attention (for reasons the whole world wouldn’t fully comprehend, specifically as to why the whole world would need to care about the shadow “dollar” business of one US investment “bank”) the recovery from the crisis wasn’t proceeding smoothly.

[Google Translate] From an international perspective, the recovery process of the world economy is difficult and tortuous, and the international financial crisis is still developing. Some countries’ sovereign debt crisis is difficult to ease in the short term. The unemployment rate in the major developed economies is high and the growth momentum is insufficient. The emerging economies are facing the dual pressures of inflation and economic growth.

That last part was the general consensus; there was to be a “new normal” in the Western world particularly the US and Europe but business as usual mostly in Asia driven by China’s uninterrupted industrial transformation. Thus, the governance challenges over there were, in Wen’s opinion, very different from those over here.

The State Council in addition to ruling pretty much everything is also the keeper of the economic targets as part of its processes for governing. For 2012, it set “around 4%” as its mandate for consumer price increases. Though the CPI had already decelerated from its peak the July before, 2011, there was widespread dissatisfaction among Chinese workers as the index achieved 6.5% at its top.

This was the main problem Wen and the Communist government prioritized. In a world without growth, China feared having perhaps too much. Still, by setting the goal for the CPI in 2012 at 4%, authorities were making it very clear they would tolerate quite a bit of inflation if it meant keeping their economy on track in an increasingly indeterminate world.

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