Zhou Xiaochuan

Zhou Xiaochuan, former Governor of the People's Bank of China (PBC), the central bank, has proposed to change the way to define and measure inflation.

In a recent article in a magazine affiliated with the PBC, he said the current inflation measurement system is basically useless and could even lead to asset bubbles.

Traditionally, it is believed that if there is excessive monetary supply, the effects will be transmitted to asset prices and lead to inflation, which will in turn prompt decision-makers to adjust monetary policies. But this law is being challenged. Central banks in advanced economies are struggling to cope with ultra-low inflation rates even as benchmark interest rates have been cut to levels near or below zero.

Zhou suggests a broader concept of inflation, with its measure going beyond the existing consumer price index by factoring in asset prices as well as the cost of public services.

Zhou served as PBC governor from December 2012 to 2018, making him China's longest serving central banker since 1949. He is vice chairman of the Boao Forum for Asia.

(Print Edition Title: Call for new inflation measurement system)