What Everyone's Talking About In China

toggle caption Alexander F. Yuan/AP

NPR's Uri Berliner files this dispatch from Beijing:

In China, everyone is talking about inflation. Prices for food, raw materials and other commodities are rising, and that's making people skittish.

Officially, prices grew at a 4.4 percent annual rate in October, the biggest jump in more than two years. But it's striking how many people you meet in Beijing who say official statistics lowball the true inflation rate.

One economist I spoke with says inflation is probably running at twice the government’s estimate. A business executive I met says the same. He factors significant future inflation into any investment his firm makes these days.

And on the street it seems to be the same story. "I tend to agree with the housewives," who are skeptical of the official inflation numbers, says economist Yu Yongding.

So why does China's actual inflation rate matter? If forecasts are correct and China's inflation rate levels out next year, then it's full steam ahead for China’s economy. Factories will keep churning out goods. The building and investment boom will probably continue without pause.

But if China's inflation rate climbs to 6 or 8 percent or higher, then the situation changes significantly. China's central bank would continue to raise interest rates. The government might step into to control prices for grain or other commodities. It would probably be forced to rein all that money flowing out of the banking system that's fueling China's boom. Lenders would pull back.

And if all that happens, then the China miracle goes on hiatus, at least for a while. And the world will notice.