China Confident of Keeping Inflation in Check

On Dec. 25 raised interest rates for the second time in less than three months as authorities stepped-up efforts to curb borrowing, rein in property prices and tame inflation

China is well-placed to tackle inflation and tame runaway house prices, Premier Wen Jiabao said on Dec. 26, while acknowledging that rising costs had made life harder for the poor.

Domestic food prices soared this year, driving inflation to rise by 5.1% in November, the fastest increase in more than two years and above Beijing's full-year target of 3%, official data showed.

In response China's central bank on Dec. 25 raised interest rates for the second time in less than three months as authorities stepped-up efforts to curb borrowing, rein in property prices and tame inflation.

Speaking on China National Radio Wen said: "The recent rise in prices across China has actually made life even more difficult for people on low and medium incomes." But he stressed that thanks to government intervention "we are fully able to control the general level of prices."

Ever fearful of inflation's historic potential to spark unrest in China, the government has ordered a range of steps to ensure supplies of key goods, offer financial help to the needy and vowed to impose price caps if necessary.

Responding to questions from listeners Wen said his government was also determined to dampen soaring property prices which have seen moderate and low income people priced-out of many urban areas. He said the government was committed to boosting housing supply and built 3.7 million housing units this year, with a further 10 million social housing units for rent and sale to be started next year.

"I am confident that through our efforts, housing prices will return to a reasonable level," he said.

To combat inflation and property speculation, China's central bank Saturday raised by 25 basis points (0.25 percentage point) each its one-year lending and deposit rates for the second time in less than three months.

The People's Bank of China has increased the bank reserve requirement ratio six times this year, highlighting the growing anxiety among top leaders over inflationary pressures.

Copyright Agence France-Presse, 2010

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