Chinese policy makers have acted for the last year and a half as if their inflation problem could be solved easily while growth continues to tick along at 8% or faster. Now they are starting to realize that the problem is more serious. But they still misunderstand why China is overheating. The root cause is a massive increase in the money supply over the past two years that is still filtering through the economy.

　　中国决策者过去一年半的种种行为都似乎表明，他们可在经济继续以8%甚至更高速度增长的同时，轻易解决通货膨胀问题。如今他们开始意识到，这个问题比预想得更为严重，但却仍对经济过热的根源存在误解。其实，真正的原因在于过去两年中国大幅增加货币供应，这些供应目前仍在不断向实体经济渗透。

　　Data released last Friday showed consumer prices in March rose by 5.4% year-on-year, the highest in three years. And there's more yet to come, as Beijing was too slow to start cooling China's red hot economy. Being too slow means that unless policy makers bring real GDP growth sharply below trend, China is at risk of runaway inflation.

　　上周五发布的经济数据显示，3月份消费者价格指数(CPI)同比上升5.4%，为三年来最高升幅。由于中国政府在为过热的经济降温方面出手太慢，通胀率尚未达到峰值。这里的出手太慢意味着，除非决策者让中国GDP的实际增长率大幅降至近年来的一般增速以下，否则中国就可能面临通胀失控的风险。

　　There is a tendency among Chinese policy makers to attribute the cause of inflation to supply-side factors, like bad weather that creates food shortages. But the real cause is Beijing's stimulus plan after China's economy plunged into recession in late 2008. The increase in broad money as a share of GDP was close to 40% in 2009 and the first half of 2010, much higher than the previous peak of 27% in 2003.

　　Getty Images上个月，中国总理温家宝在北京出席一次新闻发布会。中国决策者倾向于把通胀原因归咎为供应方面的因素，如造成粮食短缺的恶劣天气等。但真正的原因在于北京方面为应对2008年末中国陷入经济衰退而出台的经济刺激方案。广义货币供应量的增长在2009年和2010年上半年占GDP的比重接近40%，远远高于2003年占比27%的峰值。

　　Beijing's monetary boost certainly revived growth. The rebound that started in the spring of 2009 was spectacular, but within just a couple of quarters the economy had overheated. By the middle of 2009 inflation began to accelerate, and it did so on all fronts. Consumer prices, property prices and wages all began to rise at a faster pace. Against this evidence, it is hard to argue that inflation in China has been anything else but a monetary phenomenon.

　　中国政府增加货币供应量的做法无疑提振了经济增长。中国经济于2009年春天开始了强劲复苏，但仅在几个季度内就开始变得过热。到2009年中期，通胀开始在各个领域加速。消费品价格、房价和工资全都开始以更高的速度增长。以此来看，很难说中国的通胀不是一种货币现象。

　　The dangers of this monetary excess are becoming evident. China may be on the brink of a vicious wage-inflation spiral, which could undermine the authorities' grip over the economy. Actual inflation could well be higher than the official 5.4% in March. That's why Beijing is now hurriedly tightening. Still, this policy action comes too late in the day: Inflation had been on the rise for over a year and real deposit rates had been negative for nearly a year before the authorities began a meaningful withdrawal of the monetary stimulus.

　　货币供应过多带来的种种危害正在逐一显现。中国可能正处于一种恶性的工资-通胀螺旋式上升的边缘，而这种形式的上升可能不利于当局对经济的控制。3月份实际通胀率很可能高于官方通报的5.4%，这也是当前中国政府忙不迭地实行紧缩政策的原因。尽管如此，它的行动还是开始得太晚了。通胀率一年多来不断上升，而实际存款利率在有关当局开始真正退出货币刺激政策之前，已有近一年都为负值。

　　It is important to trace the monetary impetus to inflation through the stages of the business cycle to understand what the delayed policy response now means for growth. An economy is overheated and inflation starts to rise if the level of actual output is above the economy's potential. Potential output can be defined on the basis of a given degree of spare capacity: Wherever there is a tradeoff between higher output and higher prices, essentially some capacity must remain idle. The closer an economy approaches the full use of its limited resources, the more prices rise to pull unused resources into production.

　　为了理解政策反应滞后对经济增长意味着什么，很重要的一点就是要追踪在商业周期的不同阶段货币供应对通胀水平的推动作用。如果一国的实际产出超过其潜在产出，这个国家就会出现经济过热，通货膨胀也会开始抬头。对潜在产出的定义可以一定水平的闲置生产能力为依据。只要产出和价格之间存在相互推动、交替上升的现象，基本上就可以说，一定有某些生产能力被闲置。一个经济体越是不断接近其有限资源被完全利用的水平，就有越来越多的商品通过提价的方式来把那些未经利用的资源投入生产。

　　There was spare capacity in the economy in late 2008 and early 2009, because the external demand that kept China's factories chugging had slumped, pushing the economy into recession. So actual output fell below potential, and annual inflation slowed quickly, turning negative in early 2009. By mid-2009, growth had rebounded strongly and spare capacity started getting used up, with too many yuan chasing too few goods and services. By the fall of 2009 the level of actual output was already above the economy's potential and has stayed there since. If the tightening had begun then, inflation wouldn't have gotten as bad.

　　2008年末和2009年初，中国就曾出现过闲置生产能力，这是由于以前维持中国工厂满负荷运转的外部需求突然大幅减少，中国经济随即陷入衰退，实际产出低于潜在产出，年均通胀率的升幅迅速放缓，并在2009年初变为负值。然而到2009年中期，中国经济增长开始强劲反弹，闲置生产能力也开始被完全利用，出现了过多的人民币追逐过少的产品和服务的现象。到2009年秋季，实际产出水平已经超过了经济潜能，并一直延续至今。如果在那时中国政府就开始收紧政策，通胀问题不会失控到今天这个地步。

　　The good news is that the recent tightening efforts may have begun to bite. On a three-month annualized basis, a better guide to recent trends, broad money, or M2, growth slowed to 8.4% in March from as high as 28.5% last October. China published quarterly real GDP growth for the first time last Friday, showing growth slowed to 2.1% in the first quarter of this calendar year from 2.4% in the fourth quarter last year. Lombard Street Research estimates its own quarterly real GDP growth for China, which suggests that the official data could be understating the extent of the slowdown in the first quarter.

　　好消息是，近来中国政府做出的紧缩努力可能已开始初见成效。广义货币供应(M2)可以帮助我们更好地看清最近的趋势。按每季度的年化统计数据来看，中国的广义货币供应从去年10月高达28.5%的增长率已放慢至今年3月的8.4%。上周五，中国第一次发布了有关GDP季度实际增长率的统计数据。数据显示，中国实际GDP增长率从去年第四季度的2.4%减缓至今年第一季度的2.1%。宏观经济预测顾问公司Lombard Street Research对中国GDP季度实际增长率做了自己的估测，结果表明，官方数据可能对今年第一季度经济增长放缓的程度有所淡化。

　　Beijing seems serious about winning the battle with inflation. Policy makers have also shown that they understand the need for China's growth model to move away from the credit-fuelled investment binges of the past, and that this means structurally lower growth. The question is, how prepared is Beijing to accept much slower growth and its social and political consequences?

　　中国政府似乎有很大的决心，一定要赢得抗通胀斗争的胜利。另外，决策者也表现出，他们知道中国的增长模式需摆脱过去那种信贷推动的投资热，并且知道这种模式的转变意味着改变中国经济的内在结构，放慢经济增长速度。但问题是，面对经济增速大大放缓以及随之而来的社会和政治问题，中国准备好了吗？