Inflation putting heat on govt

0 CommentsPrint E-mail China Daily, March 7, 2011
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People were getting uneasy. Appeasing words were required and Wen Jiabao delivered them after checking the prices of daily necessities at the supermarket in Xilinhot city.

"The central government has taken a slew of steps to stabilize prices. We will put it higher up on our agenda," he told his audience.

That sentiment is expected to take form as he attends the annual session of the National People's Congress.

The People's Bank of China, China's central bank, has increased reserve rates for banks eight times in the past 12 months and hiked interest rates three times since October in an attempt to reduce the amount of liquidity in the economy.

The liquidity is largely caused by China's trade surplus, something it is trying to lessen by reducing exports, increasing imports and tickling domestic consumption. Inflation feeds on liquidity like a whale gorges on shoals of krill. If the krill can be hidden, the whale will sicken and die.

China's inflation-control target is 4 percent for 2011. There are many from around the world watching to see what comes out of the current political process - because these days, if China sneezes, the rest of the world catches a cold.

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