BEIJING'S effective devaluation of the yuan last week by removal of the exchange rate controls at swap centres is likely to lead to ''hyper-inflation'' in China, according to economists.
They predict that overall inflation will accelerate to more than 30 per cent from the official 12.2 per cent figure in March, while that in the cities could be even higher.
The Chinese Government recently announced that April inflation exceeded 17 per cent in 35 cities throughout the country.
Mr Woo Tun-oy, a senior lecturer with the Hongkong Baptist College's department of economics, said the Chinese economy was now under serious inflationary pressure . . . even greater than in 1988 when the inflation rate was 18.5 per cent.
''The economy in China is already at a critical stage in its development,'' he said. ''Floating the yuan could lead to a further devaluation of the exchange rate. As a result, people will be reluctant to hold on to the yuan due to its declining value.
''The move could also see see an upsurge in imported inflation because of the high cost of importing foreign goods.'' Some political analysts have suggested that the decision to float the yuan was the result of a power struggle between those who favoured flotation of the currency and those who did not.
