China's central bank said on Wednesday that inflationary pressures should not be overlooked, while the cabinet vowed to stabilize consumer prices and curb overly rapid increases in property prices.
Taken together, the statements signaled heightened concern over price and asset bubble risks, despite an assurance from China's top planning agency that near-term inflation would remain under control.
China unexpectedly increased interest rates last week for the first time in nearly three years and some economists think another rate increase could come before the end of the year.
"We still need to be vigilant about upward pressure on consumer prices," the People's Bank of China said in a third-quarter report on its website.
Consumer price inflation hit a 23-month high of 3.6 percent in the year to September and most analysts expect it to rise a little further.
"Looking at future conditions, economic growth is trending slower and a gradual normalization of money growth will help stabilize inflationary expectations," the central bank said.
"However, high grain prices, the impact of reforms to income distribution and resource pricing as well as uncertainties about global commodity prices mean that inflationary pressure should not be overlooked," it said.
The State Council, or cabinet, said after a meeting to discuss economic plans for the fourth quarter that stabilizing prices of vegetables and daily necessities would be high on the government's agenda and also vowed to tame rampant property prices.
"All regions and departments must seriously implement various control measures to resolutely curb the overly rapid rises in property prices in some cities," it said.
The government has curbed lending to developers, raised mortgage rates and enforced higher down payments as part of a series of measures to cool the red-hot property sector.
LOOSE MONETARY ENVIRONMENT
China's benchmark bond and bill yields were mixed on Wednesday, with the yield curve steepening amid lingering worries over high inflation and possible further monetary tightening.
Chinese inflation has been largely driven by food costs, which account for about a third of the country's consumer price index.
The cabinet said companies found hoarding or manipulating prices of agricultural commodities, mainly cotton, would be severely punished.
Global and domestic cotton prices have hit record highs repeatedly in recent weeks, in part due to speculative buying.
The central bank said quantitative easing policies adopted by major economies had pushed up global commodity prices and a relatively loose domestic monetary environment was also adding to inflation risk.
"The lagging effect of the previous credit surge will continue for a while," the bank said, referring to a record 9.6 trillion yuan ($1.4 trillion) lending boom last year.
Separately, the National Development and Reform Commission (NDRC), a top planning agency, said inflation would stay under control in the coming months, while economic growth would remain strong as the private sector kicks into gear.
"China's economy is gradually moving toward a market-driven mode from a stimulus-driven one," the NDRC said in a statement on its website.
The world's second-biggest economy expanded 9.6 percent year-on-year in the third quarter, easing from 10.3 percent growth in the second quarter.
Growth in some provinces may slow further, partly due to increasing pressure from Beijing to meet emission reduction targets, the planning agency said.
