According to an academic adviser to the People Bank of China, China should not solely rely on interest rate rises to curb inflation.

Mr Zhou Qiren who is also a professor at Peking University said the government must take steps to tackle supply-side strains that have been a key factor pushing consumer prices. He said that loose monetary policy in 2009 has created excessive liquidity and helped fuel prices of various products.

He added that "Much liquidity and fewer goods are the reasons behind inflation. Raising interest rates cannot change such a situation."

Mr Zhou warned that liquidity had been channeled from the real estate market to other sectors of the economy after Beijing took harsh measures to prevent a property bubble.

China CPI hit a 25 month high of 4.4% in October fuelling expectations of further tightening measures.

(Sourced from China Daily)