Chinese Economics Thread

[antimatter]

Inflation is normally included in calculations for GDP growth - otherwise those GDP figures would be meaningless.
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True, inflation is included in the GDP growth calculation. On the flip side, you better make sure GDP growth is not due to inflation growth,.

actually GDP growth calculation without including inflation growth is better, without the "bad" bloated data.


When people listed GDP growth and then inflation growth? You are assuming the GDP growth is real GDP growth, subtracting the inflation factor. But don't make an assumption on that, You have to look carefully into that.

 

[FriedRiceNSpice]

Inflation is normally included in calculations for GDP growth - otherwise those GDP figures would be meaningless.

The point is inflation leads to higher export prices and less spending which in the long run hampers economic growth.

 

[Mr T]

The point is inflation leads to higher export prices and less spending which in the long run hampers economic growth.

Absolutely, which is why both China and India need to deal with inflation - I don't think either can take it lightly. The only thing I was saying was that GDP growth itself normally takes into account inflation, as some people think that higher inflation than GDP growth means a country is effectively in recession.

 

[kliu0]

They don't care about inflation, I mean all the want is more exports. With concetration on trade and olympics, they don't have time and don't want to deal with inflation.

 

[antimatter]

Absolutely, which is why both China and India need to deal with inflation - I don't think either can take it lightly. The only thing I was saying was that GDP growth itself normally takes into account inflation, as some people think that higher inflation than GDP growth means a country is effectively in recession.

But you don't seem how to interprete that.
GDP =Consumer spending + government spending + Investment+ export

more inflation = more consumer/ governement spending.

so, GDP growth takes into account of inflation of course,
higher inflation = higher GDP :rofl: yeah there's some growth for you, but in a negative sense.

If you have GDP growth of 7% and inflation of 12% it automatically says the GDP growth is due to inflation, It's bad.

 

[Autumn Child]

They don't care about inflation, I mean all the want is more exports. With concetration on trade and olympics, they don't have time and don't want to deal with inflation.

Who are you tryting to kid? fighting to control inflation has been the main priority of the govt since last year. They are trying to reduce trade surplus as it creates uneccessary tension with other countries and also too much cash in the economy which will cause further inflation. The rescent fugure for July inflation eases to 6.3% and the macro control, tight financial policy and rising RMB cause the economy to slow down. So the govt is focusing on promoting steady growth again.

 

[Mr T]

If you have GDP growth of 7% and inflation of 12% it automatically says the GDP growth is due to inflation, It's bad.

Could you give some sort of source to explain that a bit further - you've made it somewhat simplistic. Inflation might indicate that some growth is coming from increased spending, but not necessarily most/all of it.

 

[yongke]

Yea, I don't think GDP and Inflation is linearly related to each other. For example, when GDP increase, you produce more physical products, like a car. Whatever how the price of car seem to increase, that's still one more car being produced. So you can't simply subtract GDP from Inflation.

 

[antimatter]

Could you give some sort of source to explain that a bit further - you've made it somewhat simplistic. Inflation might indicate that some growth is coming from increased spending, but not necessarily most/all of it.

yes just remember the equation. you can't go wrong

GDP=(consumer spending)+(governement spending)+ (investment) + (net export)

 

[FriedRiceNSpice]

For example, when GDP increase, you produce more physical products, like a car. Whatever how the price of car seem to increase, that's still one more car being produced.

Depends... when talking about GDP growth you have nominal growth, which is unadjusted for prices and real GDP growth, which take price changes into account. In other words, if you look at real GDP growth figures it has already been adjusted for inflation... so it reflects only a change in production, not prices. If the prices of the cars increased, it would affect only the nominal figure, but not the real figure.

For example, if you look at the RMB figure Chinese GDP in 2007 is 16% higher than Chinese GDP in 2006, yet the real growth rate is only 11.1%.

Although inflation does boost GDP and nominal GDP growth, it has no effect on real GDP growth, and for that reason only real GDP growth is given in nearly alll economic statistics.

-Got this from my macro textbook.