China Monetary Policy: Inflation Won't Last – Growth Will

Investors yesterday (Thursday) were rattled by fears that China's economy is overheating after it was revealed that the country's gross domestic product (GDP) expanded by 10.3% in 2010. However, the policy changes that will come as a result of the data ultimately will benefit both China and the United States. No doubt, inflation will remain problematic for China in the short-term, but policymakers are poised to respond with tighter lending controls and an appreciation of the nation's currency, the yuan. That will help tame a politically sensitive trade surplus with the United States and ensure more stable growth for the world's second-largest economy.