Chinese investors returning from the New Year holiday were greeted by a 25 basis point hike in interest rates. The Shanghai Composite Index lost 0.9%, in Hong Kong the Hang Seng Index fell 1.4%, and in Japan the Nikkei 225 Index declined 0.2%.
China's decision to hike interest rates to contain inflation is a missed opportunity to move the country toward a more domestic-oriented economy. A higher yuan would slow exports, but it would be a bigger overall benefit to China's economy.
As investors sell on fears that China might raise interest rates, the country's top economic official says a plan to rein in double-digit growth in food prices is coming soon.