China’s consumer inflation surged from a two-year high of 4.4% in October to 5.1% in November. Assurances that inflation will probably fall below 5% next month do not help.
Chinese policy makers have realized the dangers of runaway inflation. Authorities recently resorted to a combination of monetary policies and administrative means to manage inflationary expectations.
China’s central bank raised the bank reserve requirement ratio three times within a month to underscore the urgency of curbing runaway lending amid accelerating inflation. Now, Chinese banks will have to set aside a record 18.5% of their deposits as reserves.
English.news.cn reports Chinese policy makers probably now acknowledge excess liquidity is the main culprit.