Inflation is not a threat to China, says CLSA

However, China will have to stomach higher structural inflation in the next few years as the nation gets wealthier and wages increase at a double-digit rate, the brokerage firm argues.

Runaway inflation is not a serious problem for China and soaring food prices will subside in early spring this year. Therefore, the Chinese government's policy response will be moderate, said Andy Rothman, China macro strategist at CLSA.

He made the comment one day before China's central bank ordered lenders to hold more deposits as reserves for the fourth time in two months to stop inflation from growing too fast. The People's Bank of China PBoC announced on Friday a 50 basis point reserve ratio hike for all banks, effective January 20, sending the reserve ratio to a new record high of 19% for big banks and 17% for smaller banks. The move is...

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