China To Set Tight Monetary Policy

Linda Young – AHN News Writer

Beijing, China (AHN) – China announced its intent to tighten its monetary policy in 2011 in a shift from relatively loose to a prudent stance, a sign that it might hike interest rates.

In 2008, China responded to the global economic policy by loosening its then tight monetary policy. Now, with China’s economy humming, China has a growing problem with inflation while liquidity from abroad grows.

Annualized inflation is running at around 4.4 percent, which is above the target 3 percent and also a 25-year high.

Food price increases have fueled most of the inflation. However, China’s communist government leadership is increasingly worried over the prospect of price bubbles appearing in various market segments.

In the meantime, China’s experienced annual growth in its gross domestic product of 9.6 percent for the third quarter of the year, far outpacing economic growth of most nations.

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