With inflation hitting 6.9 per cent on the mainland, the highest in 11 years, the alarm bells are ringing loud and clear. Beijing has declared its intention to further tighten the economy. But, so far, its measures have achieved little in terms of tangible results. The tightening measures have been dispensed in moderate doses for fear of doing more harm than good to the economy. And each time, the property and stock markets, investors, banks and local officials just seem to shrug them off. The economy continues to gallop along at a double-digit growth rate for the fifth year running. Prices for pork have gone up more than 70 per cent since the start of the year, while those for other staples such as cooking oil have also increased steeply. Yet some mainland economists and officials continue to describe this as 'structural' rather than 'widespread' inflation. This largely academic distinction was still found in the policy statement put out after the annual Central Economic Work Conference held last week. But when inflation is hurting the poor and even the middle class, it is effectively both general and widespread. It now threatens to be another source of social unrest. Beijing clearly recognises this. However, state economic policy is, to a large extent, about credibility. Repeated warnings about economic imbalances and asset bubbles can only go so far. Measures that can be ignored undermine the policies behind them. The high growth rate for the economy is clearly unsustainable, and it is taking a heavy toll on both the environment and resources. Beijing is now expected to use all the measures in macroeconomic and monetary policies at its disposal to demonstrate its resolve and political will to halt runaway growth and inflation. There are signs that this is precisely the signal it is now sending out. Action is needed, although care must be taken to get the balance right. Over the weekend, the central bank raised the reserve ratio for banks by 1 percentage point. It was the 10th increase this year and the biggest in four years. This means banks must set aside 14.5 per cent of their deposits - the highest reserve ratio they have been required to meet since 1987. Beijing has also announced a major shift in its long-held monetary policy stance for next year from 'prudent' to 'tight'. A significant rise in interest rates is expected. The yuan will likely be allowed to appreciate faster than it has been so far. The central government may also be tempted to resort to administrative fiats and impose more controls to rein in rising prices, especially for staples. But this would be a step in the wrong direction for open market reforms. Adopting tougher economic measures is not without risks. Putting on the brakes too hard may well hasten the so-called hard landing - a steep drop in economic growth leading to higher unemployment and a sharp decline in exports. But there is a more immediate danger that inflation may soon be running out of control. There are already troubling signs. The price of petrol and diesel has been kept low through state controls, but with world oil prices approaching US$100 a barrel, the central government is under increasing pressure to let domestic prices rise. This will further exacerbate inflation. For all the risks, Beijing must now convince people that it is committed and able to fight inflation. Such efforts must be part of its drive to deliver more balanced growth for the country's economy. So much rides on the outcome that it cannot afford to fail.