The inflation rate in China was last reported at 4.2 percent in November of 2011. From 1994 until 2010, the average inflation rate in China was 4.25 percent reaching an historical high of 27.70 percent in October of 1994 and a record low of -2.20 percent in March of 1999. Inflation Rate in China eased to 4.2 percent in November from 5.5 percent in October, the National Bureau of Statistics said. The rate cooled for a fourth consecutive month, after peaking at 6.5 percent in July.
(A) Find possible explanations for the fact that China's inflation rate has been constantly increasing since 2009.
(B) Both Chinese government and Central Bank of China have conducted various policies to solve its rising inflation crisis. What are those policies? Why do they conduct such policies to lower its inflation rate? What are possible side effects of these policies on national economy of China?
(C) There is a rumor that US Fed used the quantitative easing to force Chinese dollars (RMB) to appreciate. It was widely believed that Central Bank of China would give up the policy of stopping the appreciation of Chinese dollars when China is facing a serious inflation problem. What are macroeconomic arguments that can be used to explain this rumor and belief?