China Government is geared up to control inflation in coming months. It intends to control inflation by controlling money supply and lending. Fears of asset bubble and price rise are haunting Chinese government. Analysts are expecting drastic measures from the Central Bank including further rate rises.
China increased interest rate by 25 basis points on Christmas surprising analysts. China inflation has reached 28-month high due to rising food and asset prices. Excess cash in the system is seen as major driver of inflation. The task of taming inflation will be a priority for the Chinese government in the next year, Reuters noted.
A deputy governor of Central Bank, Hu Xiaolian issued a statement on its website on Monday. Hu reiterated the central bank’s determination to drain excess cash from the financial system by using all tools at its disposal such as interest rates, reserve requirement ratios, open market operations and more.
Foreign investors view China’s inflation-controlling measures as a signal for strong growth of Chinese economy. Chinese officials are confident that the growth of Chinese economy is supported by strong and sustained recovery.