China can’t raise interest rates because of the risk of attracting inflows of cash

China can not raise interest rates bring the risk of cash flows that fuels inflation, said Wu Xiaoling, a former central bank deputy governor.

"The global environment of low interest rates prevent China's central bank to raise interest rates," Wu said in a speech at a conference of hedge funds in today's Shanghai. Emerging markets face capital inflows and "excessive money supply is a major reason for inflation in China," he said.

Business economists, including Australia and New Zealand Banking Group Ltd. and UBS AG. have, in contrast to Wu's opinion, said that China is likely to raise rates this weekend. China's Central Bank yesterday increased requirements of lenders reserve for the sixth time this year as part of efforts to curb inflation that rose to 28 months in November.

In October the central bank raised lending and deposit rates for the first time since 2007.

Analysts have focused on the possibility of another increase this weekend due to the release today of the November data. Consumer prices rose 5.1 percent from the previous year, producer prices rose 6.1 percent, a statistical report showed.

Wu, deputy director Financial and Economic Committee of the National People's Congress, said that M2, the broadest measure of money supply, could rise 19 percent this year.