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Beijing Can’t Have it Both Ways

Mar 08, 2011

China's government wants to fight inflation and redistribute income, giving households a bigger slice of the pie. Higher interest rates would achieve both. That's not, apparently, how Beijing sees it.

Parsing the language in Chinese government communiqués is never easy. But Premier Wen Jiabao's work report, delivered to the National People's Congress on Saturday, certainly didn't suggest that many more increases in rates, already raised three times in the past six months, are likely.

Instead, pride of place goes to "creating a good atmosphere for transforming the pattern of economic development." That suggests the government believes buoyant growth is necessary to cushion the impact of vital but painful reforms to increase the share of domestic consumption in gross domestic product.

Tom Orlik is the China correspondent for the Wall Street Journal’s Heard on the Street column.

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