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China sees inflation rise to new highs

Warnings of interest rate rises were sparked in China after inflation rose to a 28-month peak.
The inflation rate, which is measured by the CPI, or consumer price index, increased 5.1% year-to-year last month – an improvement that exceeded market expectations.
Yesterday, China reported stronger export growth than had been expected last month, which also added to inflation fears. In the past, inflation has infamously caused unrest across a country where poor families often spend anything up to half their income on food alone. In response to scares, the government has reiterated that it will take strict action against any merchants that are found to be manipulating prices on food and has also taken measures to try and tighten its monetary policy while boosting supplies of important goods.
Back in October, China’s central bank announced its first interest rate rises in almost three years with many analysts, such as Shen Jianguang of Mizuho securities, suggesting that another one might be needed soon.
The 5.1% rise of November was the largest since June 2008, and is a heavy hike on October’s rate of 4.4%. For the government, its full-year target will be 3%. Two years ago, it had to implement a $586bn stimulus package which many financial analysts believe provided a catalyst for the inflation rises.
More than anything, Beijing will be hoping to stop protests or strikes and similar actions from occurring as a result of the raise while it also deals with a public outcry over its recent clash with Nobel.



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