China's Recent Inflation Phenomenon

The demand of investment increased hardly since September 2003 .From then on, the price of raw and processed materials and food became higher. At last in the end of the year 2004, the growth rate of CPI up to 3.9%.The purpose of this article is to find the reason of the price level's increase. The theory principle which this article uses is AD-AS model. We analyze the aggregate supply and the aggregate demand, then point out that the price level's increase is because of high investment and high price of raw and processed materials and food. The price will not increase for a long time, and the new inflation will not begin. The particular aspect of this article is to explain China's inflation with AD-AS model.