QUOTE(zamans98 @ Apr 6 2010, 11:53 PM)
China is a real concern to US. First the google fiasco.
The relationship between China and US is deteriorating sharply. Many expert believe that it will get considerably worse over the coming year. We tend to think that China as an invincible force rising up to challenge the West, but by today's disputes seems to reflect the leadership's sense of vulnerability.
The leaders appear to worry about a fragile society and the risk that a rise in unemployment could lead to vast social upheaval. Most Chinese citizens aren't very political and aren't deeply upset by the lack of a ballot - as long as the living standards continue to improve.
The mood among young Chinese reminds of the movement in Taiwan and South Korea in the 80's - when an increasingly educated middle class - beneficiaries of enlightened economics policies of oppressive government resulting upended of one-party rule and achieve a democracy.
That's the core reasons why China is adamantly refusing to let the renmimbi rise further. There is no question that China's "undervalued" currency irrespolsibly creates global imbalances - but if you're in Zhongnanhai's leadership compound, your concern is just to stay in POWER.
Hence, this should answer your question, I hope.
But below are the reasons i think China should raise its interest rates:
1. Improve the relationship between China and US
2. Impede the China's Properties bubble.
3. Reduce Inflations (CHINA’S inflation rate rose to 2.7% in February from 1.5% in January)
As you can see Australia have been keep on increasing their interest rates due to the booming demand on their commodities from China. It is one of the way to balance up their economy.