September data from China’s National Bureau of Statistics (HBS) shows that the Chinese economy slowed in Q3, dropping to 9.6% year-over-year GDP growth. This represents a slow-down from 11.9% in Q1 and 10.3% in Q2 according to China Daily. Yet this is actually in-line with the goals of the government — they’re trying to slow growth and engineer a soft landing.
What’s troubling for the government is that, while growth slowed, inflation accelerated. Consumer prices rose 3.6% in September and producer prices rose 4.3%, which means that companies have even tried to shield consumers from the extent of inflation they are experiencing. The CPI was 3% in just August.
In addition, the CPI’s food component rose 6.1% in September, which is where the poorest will feel the most pain.
Thus it’s no wonder China just hiked interest rates by 25 basis points; inflation is accelerating even despite China’s success at slowing its economy.