Need for managing inflation

Over the weekend, China's central bank announced it would lower the reserve requirement ratio by half a percentage point to 20.5 percent for larger financial institutions in an effort at "fine tuning" as Premier Wen Jiabao said a week ago.

It's a move intended to maintain economic growth by pumping up substantial amount of liquidity into the financial system while keeping inflation in check.

Managing inflation expectations in China is not an easy task. In a country with a population of more than 1.3 billion people, the key economic objective is to deliver economic growth and jobs. In recent years, the emphasis has been shifted to not only the level of growth alone, but also the quality of growth and sustainability. Keeping price pressures within reasonable limits and managing inflation expectations remain significant.