Chinese hyperinflation on the horizon?

The daily fright over at ZeroHedge is an article that claims that food prices have risen 4.6% in 10 days in China, or an annualized 415% (!!!). This is clearly in hyperinflationary territory if it is correct, however I decided to take a quick look at the underlying data. After eyeballing it for a few seconds you realize that five items (out of 29) are responsible for much of this increase, and these may be statistical anomalies. They are :

• Rapes (14.5%)
• Celeries (11.0%)
• Cucumbers (28.2%)
• Tomatoes (12.9%)
• Kidney Beans (21.9%)

Now, since it is completely plausible that these specific items have been somehow in shortage due to bad harvests, or some other statistical fluke, I decided to take the median value instead of the mean value, to get a better look at the data. That looked something like this :

Just like you learned in fifth grade! Or was it eight? Probably too late with our public schools. Anyway, what we see if we take the median values is that we end up with something slightly lower, with a 2.1% reading instead of a 4.6% reading. Instead of an annualized 416% reading, we get an annualized 114% reading.

Now, 10 days is clearly WAY to little to be of statistical significance. You can't go making outlandish remarks with one ten-day period. However, IF, and I will emphasize, IF this were to be a trend that kept up, then China is clearly passing into hyperinflationary territory. And a 2.1% price increase over 10 days is still scary, even if it is a one time incident. That's supposed to be enough for an entire year.

I don't know what the implications of hysterical Chinese inflation is, more than rapidly declining living standards for people in China, and interest rates flying through the roof to save the yuan from disintegration. But the potential danger that has always existed, and will always exist, is that when Chinese price inflation gets to bad, they start exporting it back to the United States by selling their dollar holdings and releasing their dollar peg.

That might not be very far off, if this data is anywhere near accurate.