NPC Deputy and economist, Lin Yifu, says China should tighten its currency policy by raising interest rates. Lin says this would not cause large amounts of international hot money to flow into the country.
Lin says the inflow of speculative capital seeks to benefit from a rising yuan. But as China does not open its capital account to the world, there is small chance it will flow into China in large amounts. He believes raising interest rates will not only reduce the amount of hot money, but also curb the dramatic price hike of real estate and the stock market.
Lin says that raising the required reserve ratio is another way to tighten currency policy, but it will reduce job opportunities created by small-and-medium-sized business.