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China's Inflation Highest in More Than Two Years

   Heda Bayron | Hong Kong 11 December 2010
   A  woman,  right,  pays money to a street vendor, center, for a bag of
   apple she bought near the vendor's tricycle cart in Beijing, China, 11
   Dec 2010

Photo: AP

   A  woman,  right,  pays money to a street vendor, center, for a bag of
   apple she bought near the vendor's tricycle cart in Beijing, China, 11
   Dec 2010

   Consumer  prices  in  China  have risen to their highest level in more
   than  two  years,  as government economic policy makers meet to tackle
   the problem.
   China's  statistics  bureau  says  higher  food  prices pushed China's
   inflation  rate  to  5.1  percent  in November, up from 4.4 percent in
   October.
   The  data  comes as national economic policy makers meet in Beijing to
   discuss how best to tackle rising prices.
   Chinese  consumers  have  been  complaining about more expensive food,
   with  some  vegetable  prices,  including  those of ginger and garlic,
   rising  in  November  more  than  60  percent  from  a  year  ago. The
   government  blamed the increase on bad weather and the rising costs of
   pesticide, labor and transport.
   Quick, aggressive steps needed
   Economist  Stephen  Roach  of  the investment bank Morgan Stanley Asia
   says  Chinese  authorities  need  to  take  quick  steps  to deal with
   inflation.
   "The  biggest  challenge  is  striking a balance between the near term
   threat  of  inflation  and  the medium term imperative of changing the
   economic growth structure toward a more consumer-led system. My advice
   is move quickly and aggressively to deal with inflation," he said.
   As a way to curb rising prices, authorities have been trying to reduce
   excess  money in its financial system - an offshoot of a lending spree
   last  year  and  of  prevailing low interest rates. On Friday, China's
   central  bank ordered banks to hold more money as reserves as a way to
   limit lending, the sixth such directive this year.
   Higher interest rates
   China  also  raised  interest rates for the first time in nearly three
   years  in  October,  and  economists expect another hike soon. This is
   another way to limit the amount of money in circulation.
   At  least  one  city  in China, Kunming, has imposed price ceilings on
   basic necessities at retailers, including Wal-Mart.
   Overall,  food prices rose 11.7 percent last month. The U.S. fast food
   giant McDonald's, which has more than 1,000 restaurants in China, also
   raised prices by as much as one yuan or 15 cents last month.