People Daily citing Mr Ba Shusong a researcher at the State Council Development Research Center as saying that China inflation may exceed 5% to 6% in some months of next year.

He said that inflation may be between 4% and 5% for the whole of 2011.

Mr Ba was cited as saying that policy makers should allow more flexibility of the yuan to help ease imported inflation. Reserve requirements for lenders and central bank bill sales may be better tools for controlling inflation than interest rates because higher rates may attract capital inflows and pressure repayment of local borrowings.

He said that new bank loans may total CNY 7.5 trillion to CNY 8 trillion this year and at least CNY 7 trillion in 2011 to ensure investment plans.

(Sourced from People Daily)