Chinese inflation causes concern

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As it now plays such as important role in the workings of global finance in so many ways, any changes or developments in the Chinese domestic economy can have significant impacts on the world’s financial scene.

Analysts have been looking at recent change to the inflation rate in China with a view to working out how they might affect trade with the country.

China’s inflation rate hit a 10-month high in February with increases in domestic consumer prices being the main culprit.

Although growth appears to be looking to achieve the 7.5% set by the government and exports are performing better than expected, Chinese policy makers are concerned of the effects that runaway inflation may bring to international trade.

The importance of the Chinese New Year festivities have had a big impact, with food prices having been driven up and the nation’s industry virtually grinding to a halt on a massive scale over the period.

The New Year in China sees a huge movement of workers travelling from their city bases back to rural homelands for family gatherings.

Overall, consumer prices rose 3.2% from a year earlier, with food prices going up by 6%. International commentators are concerned that Beijing may introduce measures to counter the rises by tightening fiscal policies, and that would have a large impact on imports and exports.

Bank of America Merrill Lynch analysts said: "Though policy makers should be wary of inflation later this year with economic growth recovery, it's too early to call for significant monetary tightening at present."

The inflation rises come in spite of two interest rate cuts last year and the introduction of measures aimed at boosting lending in the country by lowering the amount of money that banks need to keep in reserve.

International money transactions to China are as open to the FOREX rates fluctuations as any to other country, and a specialist currency transfer firm will always be able to get the best deals.

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