If there were any doubt that the world’s two largest economies are on very different tracks, it was underlined this week. Just as Ben Bernanke, chairman of the US Federal Reserve, told Congress it was necessary to buy $600bn in government bonds to fend off the threat of deflation, Wen Jiabao, Chinese premier, was promising “forceful” measures to cope with rising inflation.
The Chinese government has been put on full alert over the past week since the release of October inflation figures showing an unexpected spurt to 4.4 per cent. Appearing in a supermarket in Guangzhou, Mr Wen promised subsidies for those on low incomes, a crackdown on commodity market manipulation and – if needed – price controls on essential foods.
Mr Wen was speaking beside shelves of cabbages, which have been one of the main culprits. The prices of 18 vegetables monitored by the authorities have increased 62.4 per cent during the past year, contributing to food price inflation in October of 10.1 per cent, year on year.