Inflationary pressures have been building in China for the last year, and they erupted into the open in July. Policymakers have responded strongly, and the issue has taken center stage. After recounting current events, this article examines the economic background and implications of the recent changes and then looks at some of the political implications. The emergence of inflation heightens the economic and political dilemmas facing China’s leaders in the run-up to the 17th Party Congress.

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