China's central bank in policy dilemma after inflation figures emerge

9 May 2013

China's annual consumer inflation increased in April, while factory prices fell for the 14th consecutive month.

The central bank has been left with a policy dilemma as it tries to balance the threat of rising prices with its support for the economy, Reuters reports.

While South Korea and Australia have both made surprising rate cuts this week, China's bank has not yet made a move as it ponders the best course of action in a global economy that is stagnating.

Easing policies could fuel property market risks, while tightening may restrict a nascent recovery after economic growth slowed to 7.7 per cent in the first quarter of 2013.

Xu Hongcai, senior economist at government thinktank China Centre for International Exchange, said: "We cannot rely too much on the central bank to support the economy."

Mr Hongcai said the government will likely rely on fiscal policy by boosting infrastructure investment and cutting taxes to underpin the economy.

By Claire Archer

Become a bobsguide member to access the following

1. Unrestricted access to bobsguide
2. Send a proposal request
3. Insights delivered daily to your inbox
4. Career development