April 5th, 2011
05:45 PM GMT
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Beijing, China (CNN) – China’s central bank surprised the market with its timing of an interest rate hike Tuesday.  The 0.25% hike is the fourth since October as the country tries to rein in inflation.

From Wednesday, the one-year deposit rate will stand at 3.25% and the one-year lending rate at 6.31 %.

The announcement came on a Chinese holiday and ahead of inflation data for March, being released next week, leading  to suggestions it was a pre-emptive strike to soften the market for the figures.

Qing Wang, economist with Morgan Stanley, said the hike has “a strong signalling effect.” He is picking consumer prices to come in at 5.2% year-on-year for March due to rising prices of food, fuel and housing.

China, like other economies around the globe, is caught between a need to rein in inflation and promote growth. But as the price of oil and other commodities continues to climb, hiking is winning out.

The European Central Bank could be next, with expectations it will raise interest rates by a quarter of a percentage point Thursday. It would be its first hike since 2008.

Dariusz Kowalczyk, of Credit Agricole CIB, expects the Chinese government to continue increasing its interest rates due to the rising prices. "Bank rates need to be higher than inflation," he said. "Otherwise, people will invest in houses and equities, leading to asset bubbles." He warns it could slow China’s growth.

But others believe rates could have peaked as the economy slows and inflation flattens out. Mark Williams, senior China economist with Capital Economics, thinks Chinese policymakers will opt to control credit growth by ordering banks to keep more cash in reserve.

The hike follows Chinese Premier Wen Jiabao’s March announcement to his nation's legislature that combating inflation would be the government's top priority in 2011.

With so many policymakers looking to fight inflation this year, how worried are you about rising prices?

April 5th, 2011
11:18 AM GMT
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April 5th, 2011
06:13 AM GMT
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In this week's "Executive Insider," Maggie  Lake speaks to Peter Löscher, CEO of Siemens.

Filed under: Executive Insider

April 5th, 2011
05:18 AM GMT
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(CNN) – In times of crisis, fears run faster than facts.

That axiom has never been truer than the aftermath of the March 11 Japanese earthquake and tsunami, and the ongoing drama at the Fukushima nuclear power plant. And every new headline with the words "radioactive" only heighten those fears, like news that crews at the damaged plant are now dumping thousands of tons of radioactive water into the sea.

To be sure, the news is troubling and there are very real fears the nuclear fallout could get much worse. Yet as nuclear expert Michael Friedlander told CNN's Anderson Cooper, the offload into the Pacific Ocean will dilute the contaminated water below levels considered harmful. Still, he adds, "this isn't best practices" in the nuclear industry.

And it's hitting products from Japan. As CNN's Kyung Lah reports, Sven Kilian, who sells Japanese toys and gadgets on JapanTrendShop.com, runs a Geiger counter over toys before exporting - even though the toys have been no where near the Fukushima nuclear plant.

CNN's Martin Savidge talked to Japanese farmers who are facing ruin not because their produce has been contaminated, but because they carry the label, "Made in Fukushima." The situation is made worse for grower because a large number of countries - including the U.S., Australia, South Korea and Taiwan - have restricted Japanese imports as a cautionary measure.

Even things simply labeled "Japanese" are taking a hit abroad. A visit to local Japanese restaurant in Hong Kong found it nearly empty on a recent Saturday night - since the nuclear disaster, people have stayed away, even though the fish, vegetables, rice and noodles and most things on the menu weren't sourced from Japan.

"This is going to be a measurable impact," William Saito, an economic advisor to the Japanese government, told CNN. "And some industries and some companies will not survive."

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Filed under: Japan

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