Nation's inflation due to economic structure

Inflation is always and everywhere a monetary phenomenon, monetarists say. While this is being increasingly challenged, the saying to some extent holds true in China.

For the latest round of inflation, which started last year and rose to a 12-year high of 8.7 percent year-on-year in February, too much liquidity in the market was given as the fundamental reason. Of course, soaring international oil and other commodities prices, and "imported inflation", were also responsible.

What has spawned excess capital in the domestic market? Many would instantly say "hot money" or speculative capital, which has flooded into China to take advantage of the rising yuan. Economists, however, argue that the unbalanced structure of the Chinese economy may be the main reason.