Excerpt
As the United States and Europe struggle to get their economies rolling again, China is having the opposite problem: figuring out how to keep its revved-up growth engine from generating runaway inflation.
The latest sign that things were moving too fast came on Sunday, when China’s central bank ordered the biggest banks to set aside more cash reserves.
The move essentially reduces the amount of money available for loans, and is an attempt to cool down the economy. It follows the government announcement on Friday that China’s economy was growing at an annual rate of 9.7 percent, by far the strongest performance by any of the world’s biggest economies.
Because China is now the world’s second largest economy, after the United States, and because the country has been a leading source of global growth during the last two years, money problems here can reverberate from Wal-Mart to Wall Street and the world beyond.
High inflation endangers China’s status as the low-cost workshop for the world. And if the government’s efforts to fight inflation cause the economy to stumble, that will cloud the outlook for international businesses — whether multinationals like General Electric or copper miners in Chile — that have been counting on China for growth.
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