Inflation threatens China's economic boom

April 18, 2011 - 0:0

Latest inflation figures suggest China’s economy may be overheating, with the country's poorest hit by rising food prices. Food prices have risen by almost 12 percent in the past year, driving up overall inflation. Consumer prices in China are up 5.4 percent over a year ago, according to the National Bureau of Statistics. That is the highest figure in nearly three years and largely the result of spiralling food prices which rose by nearly 12 percent from the year before. Meanwhile, China’s economy continues its seemingly unstoppable boom. Latest figures show it growing by nearly 10 percent in both of the last two quarters. In its attempt to stave off overheating, the Chinese Government has raised interest rates four times since October. Now another rate hike looks imminent, say many economists. Other measures to cool the breakaway price rises could include increasing reserve requirements for banks. China’s biggest banks are already required to hold 20 percent of deposits – a record high. China could also appreciate the currency, the yuan. Several Western governments accuse the Chinese authorities of holding its currency artificially low, in order to help the country’s exporters compete in global markets.