Article: inflation is key risk as China sees surge in trade

In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time. When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a loss of real value in the internal medium of exchange and unit of account in the economy.( Cited from: en.wikipedia.org, 15 April 2011) .As inflation is a problem for many reasons ,the main one is that once it takes hold ,it is unpredictable. Unpredictable inflation is a problem because it redistributes income and wealth, and diverts resources from productive activities to inflation forecasting. At its worse, inflation becomes hyperinflation, many workers are paid twice a day because money loses its value so quickly. (Elements of Economics, p60-61).

It is well known that inflationary pressures are mounting globally and has caused many difficult issues in China .Controlling inflation is a big economic issue in China and it is also a hard nut for China to crack. To measure inflation rate, we are interested in the Consumer Price Index (CPI), which measures the average of the prices paid by urban consumers for a “fixed” basket of consumer goods and services. As we can see in table 1, most regions in China need to control serious inflation because the growth rate of CPI is over 5%. Serious inflation has pushed prices much higher than before,
Table1[pic]
(Cited www.stats.gov.cn ,15 April 2011) especially the costs of food in China. Given by the data about Consumer Price Index (CPI) by Category, the prices of food had a 11.7% growth rate in March 2011 than the same period last year, especially the fresh fruits increased by a percentage of 29.9 . As