The increasing cost of living China has begun to worry the authorities. In July, inflation was higher than expected despite government efforts to control prices.
The consumer prices rose 6.5% in July compared with the same month last year, reported the National Statistics Office. This price rise occurred despite the Central Bank of China increased interest rates five times since October 2010 in an attempt to control prices.
Rising prices have become a serious political problem in China. “There is no doubt that inflation is not improving, because the numbers are recorded each month” Said Wei Yao Societe Generale.
Chinese authorities have taken control rising prices as their top priority. Not only have increased cost of borrowing also tried to slow lending banks, raising the level of minimum reserves during the previous 12 months.
However, analysts say the flow of the global economy could put the authorities in a difficult situation. These figures come with growing concerns about a slowdown in the global economy, with U.S. hesitant their recovery and debt problems in Europe.
Authorities will need to strike a delicate balance between trying to control prices and ensure that monetary policy Restrictive not hurt economic growth. Notably, the strongest economic sector China falls in exports. Analysts warn that given the situation in the U.S. and Europe China must act quickly.
To Yunfei Tang of Founder Securities, it is time for the government to relax its restrictive policies and stimulate domestic demand to boost domestic consumption.
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