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The Effects of Asia Inflation and How it can Affect the Global Economy

Updated on September 3, 2011
Source

Looking Back to Asia Inflation Fears in Jun 2008

Its always instructive to look at historical precedence to understand how different economies will react to systemic shocks like accelerated price hikes.

Inflation Rates of Key Asian Countries

This page will focus on the effects of rising prices and track the key inflation rates across Asia.

We will be tracking in particular the Consumer Price Index (CPI) across the following countries:

  • China
  • India
  • Japan
  • Indonesia
  • Singapore
  • Hong Kong
  • Taiwan
  • Vietnam

Its Not just Food Prices

The global rise in food prices is a reality. However increase cost in food is still managaeble considering that food expenses accounts for a small fraction for most households. Most Asia countries have also built up foreign currency reserves during the past few years. These reserves can be used to lessen the impact of inflated food prices on the poor and the middle class.

The more worrying trend is that Asia countries including China and India have been experiences too fast growth that is and will further strain the countries capacities. This over heating partly due to the influx of global hot money is leading to asset bubbles. More critically it is raising labour cost in what has previously been low cost production powerhouses.

This double whammy of Supply Push inflation from food and labour shortages, and Demand Pull inflation from the recovering asia economies is set to push up core inflation. 

India's Inflation Rate Chart

The Rising Asia Economic Giant

China is perhaps one the the most talked about Asia and even global economic giant that on everyone's minds.

It is important to see beyond the official economic statistics when trying to under the causes of China's inflation effects and trends.

Take a look at the inflation rate chart below and add to this the knowledge that this "official" inflation rate from the "opaque" Chinese government is probably much lower than the actual inflaton rate.

China's Inflation Rate Chart (10 Years)

Source

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