China may raise rates further as inflation hits 7.1-pct

BEIJING, Feb 25, 2008 (AFP) – Inflation remains the primary risk to China’s economy, and the government will stick to a tight monetary policy, state media reported Monday, citing a central bank vice governor. China hiked interest rates six times last year in an effort to tame inflation and cool the economy, which nevertheless grew at 11.4 percent in 2007. However, the tightening measures will be “proper” and “moderate” to avoid hurling the world’s fourth-largest economy into recession, Yi Gang told a seminar in Beijing on Sunday, according to Xinhua news agency.

Yi’s remarks suggested no major rethink of the tight monetary policy which the central bank announced in December to supersede the “prudent” monetary stance that had set the tone of policy-making for a decade.

China’s inflation rate hit 7.1 percent in January, the highest level in more than 11 years.

Although the impact of the US subprime crisis was spilling over and China was suffering from the worst winter weather in 50 years, the government would not change its tight monetary policy, Yi said.

The People’s Bank of China had evaluated the influences of the two factors on investment, consumption and trade and would keep the policy u