China is at risk of a rebound in inflation and monetary policy should focus on managing financial system liquidity as the best way to underpin slowing growth, the official Financial News said in a front page editorial on Thursday.
The paper - operated by the People's Bank of China, the central bank - said the policy focus should be on managing reserve requirement ratios (RRR) for commercial lenders and open market operations to ensure stable growth in money supply.
"Some factors fuelling the last round of inflation have not been eliminated and the prices of goods under control previously could rebound again," the paper said.
The paper said China should keep curbs in place designed to kill off speculative pressure in the real estate market that saw home prices double in key cities between 2009 and 2011, pushing them beyond the reach of many middle class Chinese citizens.
It identified imported inflation as a particular risk, along with seasonal price factors. China is especially sensitive to food price inflation as sharp rises in the cost of basic necessities have accompanied past periods of social disquiet.
China has battled to bring consumer inflation back under control after it spiked to a three-year high of 6.5 percent in July 2011 in the wake of massive monetary and fiscal easing in Beijing's 4 trillion yuan ($635 billion) economic stimulus plan launched at the depths of the 2008-09 global financial crisis.
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