For much of the past three decades China had all the land, labour and resources it needed to sustain rapid economic growth. Prices occasionally spiked, especially for food items, but were swiftly subdued. Not any more. If there’s a lesson from May’s 5.5 per cent rise in the consumer price index – the 11th month in a row above the government’s target – it is that supply pressures are becoming irresistible.

The country’s shortage of youth labour is well known. As China Insider, an economics consultancy, notes, the population of 15- to 24-year-olds is shrinking about twice as fast as in Japan. Less well appreciated is the shortage of almost everything else. China has just 0.089 hectares of arable land and 2,134 cubic metres of renewable water resources per capita, both among the lowest ratios in the world. Those fundamental drivers, along with rising import prices for commodities to fuel the fixed-asset boom, caused seven of the eight major categories of CPI to show a pick-up in year-on-year inflation in May (the other, housing, was mercifully flat). And all this while short-term liquidity, in the form of Shibor, the main Shanghai interbank rate, continues to tighten.

The regular deployment of riot police to quell public disorder shows that Beijing is alert to the social consequences of higher food bills. The monetary implications are another matter. Policy measures are mostly limited to tinkering at the edges: last week’s executive meeting of the State Council recommended adjusting value added tax for agricultural logistics groups, and encouraging direct-purchase programmes between supermarkets and farmers. While this could moderate price swings in pork and cabbages, deeper reforms are needed to counteract broader inflationary forces. The renminbi is rising, but fitfully – annualised gains against the dollar since the beginning of May are just 1.75 per cent – while real interest rates on deposits have sunk to minus 2.25 per cent. In the face of structurally higher prices, both look incongruous.