China struggles to tame inflation

As the US and Europe try to find out ways to spur their economies, China is facing the opposite problem:  figuring out ways to keep its booming economy from triggering runaway inflation.

In the latest sign that things were moving a bit too fast, China's central bank yesterday ordered the biggest banks to keep aside higher cash reserves.

Sunday's decision to raise the capital reserve ratio for banks to 20.5 per cent of their cash came as the fourth such hike in this year.

Amid soaring food prices, the government had revealed on Friday that the consumer price index in March was up 5.4 per cent, its steepest rise in nearly three years. (See: Chinese economy expanded in March amid high inflation) 

The move is essentially aimed at cutting the amount of money supply available for loans and attempts to cool down the economy.

It comes in the wake of the announcement by the government on Friday that  China's economy was growing at an annual rate of 9.7 per cent, by far the strongest performance by any of the world's biggest economies.