Central bank governor Zhou Xiaochuan said that inflation still runs high in China, indicating that Beijing would continue to tighten monetary policies to rein in price bubbles.
Zhou, head of the People's Bank of China, said on Sunday in Japan that China's inflation is "higher than expected" and warned that banks' reserve requirement ratios (RRR) could be tightened further to mop up excessive liquidity in the world's second largest economy.
China's consumer price index (CPI), a major gauge of inflation, rose to 5.1 percent in November and 4.6 percent in December year-on-year, hitting the highest levels in more than 2 two years.
Zhou said that although the rise of prices slowed slightly in December, it was stronger than anticipated. Experts warned that CPI could increase again in January and February, as the Chinese are on a buying spree for the traditional Spring Festival season, which falls on February 3.
"Inflation is still higher than many people expected. It may be still going up a little, so we should keep vigilant on that," Zhou said on the sidelines of meetings in Kyoto, Japan.
Asked whether China needed to again raise reserve requirement ratios due to the excessive liquidity conditions, Zhou said: "Maybe we need to continue our efforts."
Beijing has launched a series of monetary tightening measures, including two interest rate hikes and a number of bank reserve requirement ratio increases over the last year in attempts to dampen rising consumer prices.
Last week, the central government ratcheted up its efforts to rein in property prices. It raised the down payment requirement for the second homes from previous 50 percent to 60 percent. And, it encouraged Shanghai and Chongqing, two of the largest cities in China, to experiment with a brand-new property tax in order to control housing hoarding and profiteering, which have been running rampant in China.
China's economy accelerated in the fourth quarter last year, expanding 9.8 percent year-on-year, stronger than 9.6 percent growth in the third quarter. That took the full-year gross domestic product growth rate to 10.3 percent in 2010, up from 9.2 percent in 2009.
Most economists have predicted that the country will settle for a GDP growth rate lower in 2011 than last year, possibly between 9-10 percent.
