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Is China Serious About Fighting Inflation?

Mounting inflationary pressures in China are strengthening the case for a faster appreciation of the yuan, U.S. Treasury Secretary Timothy Geithner said last week, ahead of the high-level U.S.-China Strategic and Economic Dialogue in Washington this week, where the yuan will undoubtedly be on the agenda.

In recent months, China has stepped up the fight against rising prices. Since mid-October, the People's Bank of China (PBOC) has hiked the reserve requirement ratio (RRR) for banks 10 times and it's raised deposit and lending rates four times. In March, the consumer price index (CPI) rose 5.4 percent, a 32 months high, and above the government's annual target of 4 percent.

Many analysts think authorities will have to do even more to tame prices, with some suggesting growth would have to slow in order to achieve that goal. Many, like Geithner, have also suggesting using the yuan - a sticky topic for China - as a tool to keep inflation in check.

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