China raises interest rates to control stubbornly high inflation

| February 8, 2011
’China

The People’s Bank of China has again raised interest rates in a bid to curb high inflation.

The central bank first lifted rates last October – the first such move since 2007.

Today’s rise represents the third in four months and the Bank has increased the one-year yuan lending rate from 5.81% to 6.06%, and the one-year yuan deposit rate to 3.0% from 2.75%.

The Chinese economy, which is now the world’s second largest, has experienced strong economic growth but stubbornly high inflation continues to weigh on the economy.

Inflation fears are always a concern to Chinese officials due to the potential for price rises to trigger civil unrest.

Inflation eased to 4.6% in December, from November’s 28-month high of 5.1%.

However, despite the fall, analysts are still concerned for high inflation and said the Government needs to take more action. The inflation figure for December was higher than expected.

There are fears that inflation will increase to around 5.3% in January as food prices continue to soar.

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