US Economists: Inflation And Stability Are Causing China's Dilemma.
He served as an adviser to the International Monetary Fund and the US Treasury Department.
Economics
According to John Makin, the Chinese government is facing an increasingly serious threat posed by the acceleration of inflation and massive capital inflows, which may have an impact on China's political stability and the global economy.
Makin said in an interview that China is in a dilemma and wants to curb it.
Inflation
It also does not want to take measures that may cause political instability before the change of government leadership in 2012.
Makin said the problem is that if the Chinese government does not control inflation, it will face political instability.
Makin said China is prepared to rely on targeted tools to fight inflation, but it is difficult.
The US government has been urging China to allow its appreciation of the renminbi as a way to curb price rises.
China has also allowed the renminbi to rise steadily and slightly.
But the Chinese government has made it clear that they will use the appreciation of the renminbi as a secondary election tool.
Makin also said that the appreciation of the renminbi may only attract more capital into China.
Makin suggested that China could consider relaxing its residents overseas.
Investment
Restrictions are used to solve some problems.
He said relaxing restrictions on capital outflow could help to reduce excess liquidity in China and release some inflationary pressures.
Makin said China's difficulties in dealing with inflation pose risks to the global economy.
If the Chinese government is in a hurry and the economic growth is seriously slowed down by overtightening policy, its trading partners may be hit.
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