Inflation takes off in Asia

Inflation

TEXT OF STORY

Kai Ryssdal: The Fed says inflation here is going to flatten out sometime next year, but in many parts of Asia, prices are skyrocketing and giving no sign of doing anything different any time soon.

From Beijing, Lisa Chow reports that's just the cost those countries have to bear for their rapid economic growth.


Lisa Chow: In the past decade, many Asian economies made money exporting electronics and textiles. For most of that time, workers produced more than they consumed, but wages have steadily grown and now people want stuff, which means higher prices.

Arthur Kroeber is with economics research firm Dragonomics in Beijing. He says there's another factor contributing to inflation in these
countries: bad roads.

Arthur Kroeber: The infrastructure is rotten and so you just can't get the goods to the people cheap enough or fast enough, so prices rise very rapidly.

Brad Setser tracks Asian economies for the Council on Foreign Relations in New York. He's encouraged by hikes in interest rates in the Philippines and India to tame inflation, but he's less optimistic about China. He says government subsidies for petroleum have kept gas prices low and consumption high.

Brad Setser: If I had to guess, I would guess that inflationary pressure will remain significant in China, although there's some possibility it may have peaked in countries that have been more willing to take aggressive action to combat inflation.

And then there's food. While Americans spend about 10 percent of their income on food, Chinese, Indians and Vietnamese spend more than 30 percent. Higher food prices have sent inflation rates soaring.

But just as growth helped trigger inflation, a global economic slowdown may be the cure. As Asia's export economies cool, consumer demand is likely to fall.

In Beijing, I'm Lisa Chow for Marketplace.

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