Economy

Economist calls for rate move to fight inflation

By Zhong Nan and Hu Haiyan (China Daily)
Updated: 2010-12-16 09:37

BEIJING — China needs to increase the interest rates by 2 to 3 percentage points next year to curb the inflation, a renowned Chinese economist said.

If the government wants to control the inflation effectively, the interest rate should be raised by 200 to 300 basis points next year, economist Mao Yushi said on Wednesday at the sideline of a forum.

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"China is facing the risk of inflation, and it is necessary to raise the interest rates to tackle this problem," he said.

The 81-year-old economist also said the government could consider appreciating the renminbi faster to fight the inflation.

China's consumer price index, the major gauge of inflation, jumped to a 28-month high of 5.1 percent in November, prompting the country's leaders to say anti-inflation is now a top priority of the government's job.

The central bank announced on Dec 17 that it will raise the reserve requirement ratio for commercial lenders by 50 basis points from Dec 20 to mop up excess liquidity. It is the sixth such move this year.

After the hike, about 350 billion yuan of lending is expected to be frozen. However, the central bank left interest rates unchanged.