Article: China raises bank reserves to record in

inflation fight

Name : Vo Dinh Thanh Hung

Class: Dip 19B
Lecturer: Rodney Sim

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 Nowadays, China is known as a one of the biggest economies in Asia. China’s
economy has recorded great achievements in growing its economy for decades.
According to some economists, “A Cough” of China even affects other economies all
other the world. Follow the trading economics website, the inflation rate in China was
last reported at 4.9 percent in January of 2011. From 1994 until 2010, the average
inflation rate in China was 4.25 percent reaching an historical high of 27.70 percent in
October of 1994 and a record low of -2.20 percent in March of 1999. (Cited
www.tradingeconomics.com/Economics/Inflation-CPI.aspx?Symbol=CNY, 1 March
2007). As we can

According to the article, China is facing to high inflation from the end of last
year till now. China decided to raise required reserves to a record 19.5 percent, adding to
an increasingly aggressive effort by Beijing to reduce stubbornly high inflation and this is
the fifth increase since last October. The inflation reached 4.9 percent in the year to
January, which was accompanied by alert signs that price pressures were growing. Over
the past four months, the People’s bank of China has also raised interest rates three times
and ordered banks to issue fewer loans in an attempt to make sure it can meet a 2011
inflation target of 4 percent. All the above information such as evidences to show that
economy of China is processing in inflationary. Likewise, Central bank determined to use
monetary policy for controlling inflation that is happening during the last few months.
However, “believe a price must be paid to bring down inflation. Some industries may
suffer as a result of the tightening but it won't hurt the broad economy” said Lu
Zhengwei, an economist; as a result for reducing inflation, China may receive negative
effects such as: lower money supply and excess money for loan, high interest rate,
decrease in money creation, etc.
Look at the article, we can see that China’s objective is to cool down the
inflation by raising bank require reserve. I will analyze

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