Xiao Hu,

The Federal Reserve is not even hitting its 2 percent target. So the difference is a percent or two in the United States each year versus much more in China.

http://online.wsj.com/article/SB10001424052748703398504576099440536111426.html

How much more? Official inflation statistics in China routinely come in above 5 percent, and there are very good reasons to believe that these figures are understated by about half. I'm not sure how long you have been in China or what your sense of the local market is (it may be different from mine), but in my personal experience, housing costs here in Shenzhen have doubled in the last five years, while food costs have also increased appreciably.

There is another way to think about it too. Chinese GDP is routinely measured at 8 percent or higher. Since most of this growth is driven by capital investment, there should be a lot of competition for capital that should drive up interest rates. We definitely see this in the shadow banking sector, but not in the official banking sector. Japan worked a similar way in the 1970s and 1980s, so this isn't a China-specific thing, but it doesn't make letting Chinese banks manage one's money seem a very attractive proposition.