China jumps on the fiscal and monetary brakes

Rapid economic growth in China has pushed inflation to an 11-year high of 8.7% in February 2008. This was driven significantly by higher food prices, with the price of pork rising by nearly 64%. This higher level of inflation has led to concerns that policy may need to be tightened.

Sweet and sour pork The Economist (13/3/08)
China inflation hits fresh high BBC News Online (11/3/08)
Chinese inflation alarms authorities Guardian (11/3/08)
Chinese warn on decade-high inflation Times Online (5/3/08)
Chinese inflation shoots to 11-year high Times Online (11/3/07)
China tries to apply brakes to economy Guardian (4/3/08)

Questions

1.	What are the main causes of rising inflation in China?
2.	Assess the extent to which policy needs to be tightened to counter the rising level of inflation in China. What would be the possible downsides of such a policy?
3.	Discuss possible policy changes that could be implemented by the Chinese government to reduce the level of inflation.