(Xinhua)
Updated: 2007-12-21 20:02

Meanwhile, last week, the US Federal Reserve sliced a key interest rate by 25 basis points to 4.25 percent, the third reduction in three months, in an effort to prevent a recession.

There are market rumors that, as Chinese and US rates converge, more "hot money" will flow into China as some investors bet on the appreciation of the Chinese currency.

But that isn't the government's main concern, analysts said.

"The key concern for the central government is to cool off the red-hot economy, not the influx of hot money from overseas and foreign exchange problems," said Tang Min, deputy secretary-general of the China Development Research Foundation.

China's consumer price index (CPI), the key inflation indicator, surged  to an 11-year high of 6.9 percent in November, mainly driven by soaring food prices.

Any fund inflow would be "targeted at the financial markets including the surging stock market and the real estate market," said Ou, adding that the country would attract the inflow of hot money betting on the appreciation of the yuan.

Market observers predicted that next year, the Chinese currency would appreciate by more than 8 percent. The Renminbi, which stood at 7.3572 to one US dollar on Friday, has appreciated about 11 percent since China depegged it from the US dollar in July 2005.

China has taken a series of measures to cool off the economy, including increasing interest rates, encouraging domestic consumption, and better managing the property and stock markets.

   1 2   

   1 2