What Explains Inflation in China?

This paper studied China’s inflation based on yearly data of related factors in the past three decades. It examined the nature and causes of inflation evolution in China. The findings indicated that from demand pull perspective, the Quantity Theory of Money offers a sensible explanation of inflation trends in China than the New Keynesian Phillips Curve; and from cost push perspective, the Structuralist Cost-push Theory correlates the food price movement with inflation trend. The year 1998 seems to be a structural break in inflation evolution. Overall, the paper confirmed the hypothesis that inflation in China is largely driven by excess money supply, and is correlated with changes in food price level. However, the findings are subject to various limitations of the paper, such as data quality, econometric technics, and model sophistication.