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4/15/11

China Economy: Political Overlords Shackle China's Monetary Mandarins - by Bob Davis

China's premier, Wen Jiabao, warned last month that inflation is like a tiger—once unleashed, it is "very hard to cage again."

Yet Beijing has been slow to pounce, even though food prices are rising at a nearly 12% annual clip and overall inflation hit 5.4% in March, according to numbers released Friday, more than twice the pace of a year ago. The steps it has taken thus far, including last week's 0.25% interest-rate increase, have been modest. If it had been solely up to the People's Bank of China, the nation's central bank, the inflation-busting would have begun sooner, according to people involved in the matter. But the process of fighting inflation here is Byzantine, much like the Chinese government itself.

Monetary policy in the world's second-largest economy involves dueling bureaucracies, secretive committees and a Communist Party whose influence is hidden but pervasive, these people say. No single official is in charge, making it nearly impossible for other leading nations to coordinate economic policy with China.

For more: Political Overlords Shackle China's Monetary Mandarins - WSJ.com

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