Investing In Gold And Silver For Capital Preservation And Appreciation

Inflation Strikes In China

High inflation is usually associated with poor countries, but recent events have shown that it can also affect rich countries. The latest which encounters problems with too high rates of inflation is China, known to be the second largest economy in the world. When prices of products and services increase for a certain period of time, inflation occurs. That means that every unit of currency can purchase fewer products and if this situation is constant, it can lead to a devaluation of the national currency. The Chinese government is trying to maintain a 4% rate of inflation, but this margin has already been outstripped by one percent. So what authorities are trying to do is to stabilize it and eventually slow it down.


High inflation is usually associated with poor countries, but recent events have shown that it can also affect rich countries. The latest which encounters problems with too high rates of inflation is China, known to be the second largest economy in the world. When prices of products and services increase for a certain period of time, inflation occurs. That means that every unit of currency can purchase fewer products and if this situation is constant, it can lead to a devaluation of the national currency. The Chinese government is trying to maintain a 4% rate of inflation, but this margin has already been outstripped by one percent. So what authorities are trying to do is to stabilize it and eventually slow it down.

At the end of the 20th century, China’s economy boomed and has continued to develop ever since. 2008 was a difficult year when the economic crisis hit China as well, but the effects here were much less serious than in the rest of the world. China developed an important property bubble and has positive levels of the GDP. However, the beginning of 2011 brought with it higher prices and a higher level of the inflation. Is this going to be a similar situation? Everyone hopes so.

An important percentage of the population has already began to protest against the 4.9% higher prices, comparing to the same month last year. Noodles, beverages and cosmetic products were most affected, and four major producers in China have already stated that more prices will be increased. The reason? Higher prices for the raw materials. Oil and flour were more expensive and the instability of the price of oil is constantly threatening the Chinese economy. The Renminbi, the Chinese national currency, has slowly began to appreciate comparing to the dollar, but specialists aren’t optimistic in what concerns the Chinese economic boom.

The government has already devised a series of measures meant to stabilize the variations of inflation and to keep it low. Thus, banks have tightened their requirements for money loans. As there is an excess of cash on the market which can help inflation increase, the interest rates have also been increased four times by now. All these measures have however not helped too much for the moment, the inflation being still one percent higher than the limit the government had wished to maintain.

Chinese politicians have the difficult task to maintain inflation as low as possible, and with it, civilian protests. This may prove to be difficult because the global economic events are almost impossible to predict as well as their impact on the Chinese economy. For the usual investor who doesn’t want to lose money and to have a successful investment, many economists suggest gold, a currency which will not be affected by inflation and high prices of different goods and services. It is stable and safe and always bears fruit.

Gold Bullion coins are the perfect option if you want to invest in gold, due to their 99.9% purity.

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