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I like how China gradually makes changes, ending at the eventual goal.. without one chaotic leap with disastrous impact.

Exactly. I can see the higher prices right now (I'm in Shanghai at the moment), and inflation is higher than in the US. However, their economy is growing even faster.

A GDP growth of 3% with a 2% inflation rate is much worse than a GDP growth of 10% with a 5% inflation rate.

China's economy is nearly as free-market as the US at this point, and you see a lot of pressures to open up the other aspects of life. China's opened Pandora's box of capitalism, and right now I get the feeling the leaders here aren't so much fighting the loss of a communist society as trying to manage the change to a socialist (think Germany or France style) government with the least harm to the country.

The Chinese, for anything else, are highly pragmatic people. The writing's on the wall that a free market and open society are the only ways they will grow in terms of international power and position, and so the problem is how to transition there with the least disruption to the day-to-day realities.

TIC - This Is China.

A GDP growth of 3% with a 2% inflation rate is much worse than a GDP growth of 10% with a 5% inflation rate Er, I wouldn't say that at all. It's far more complex than that. In a developed economy with broader wealth distribution (I'm not talking about peaks and valleys, I'm talking about a wider spread in the middle) and decent growth, a few points of inflation annually are the norm and pass by relatively unnoticed for the majority. (Save for spikes in something like, oh, gas.) 5% is not better than 3% simply because GDP is growing more rapidly, most especially when the majority of your population is not benefitting proportionately from that GDP increase _and_ is starting from a very low point in the first place. (Versus a mature economy where inflation outpacing rises in income can more readily be absorbed for an extended period of time by average consumers.)