Bloated Dragon

Consumer prices are surging in China. Will inflation be the country's next major export?

China Photos / Getty

A clerk counts stacks of Chinese yuan and U.S. dollars at a bank in Shanghai, China.

Wal-Mart shoppers, meet Xu Yaqing. She's a 62-year-old retiree who lives on a fixed income in Beijing. Xu and her husband get by on $263 a month, and lately, the couple's monthly pensions haven't been enough. The price of the peanut oil that Xu cooks with has doubled in the past few months, and soaring costs for other staples have forced them to cut back on milk and to substitute bean curd for meat. They're not starving. But they're scared. "Prices are going up so much and so quickly," Xu complains.

Xu's lamentations, and...

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