This article sums up nicely the inherent dangers when inflation begins to rise at rates like this.
China Inflation Quickens; Close to Fastest Since 1996
May 12 (Bloomberg) -- China's inflation accelerated to close to the fastest pace since 1996 as food prices soared and the government slowed gains by the yuan.
Consumer prices rose 8.5 percent in April from a year earlier, the National Bureau of Statistics said today, after gaining 8.3 percent in March. That topped the 8.2 percent median estimate of 22 economists surveyed by Bloomberg News.
Food prices jumped 22 percent, a threat to social stability as the world's most populous nation prepares to host the Olympic Games this summer. Faster currency appreciation, while reducing import costs, also risks attracting more speculative funds into an economy flooded with cash.