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China Official Says Inflation Weighs on Global Recovery

Growing inflation worldwide is casting a pall over the global economic recovery and risks hurting the financial system, China's top banking regulator has been quoted as saying.

Liu Mingkang, chairman of the China Banking Regulatory Commission, said inflation was soaring in both developed and emerging economies as a result of monetary easing in the United States, the European Union and Japan, which had sent a flood of liquidity into global commodity markets, pushing up prices.

"If asset bubbles and inflation pressures continue to increase, (the world) could be forced down the path of raising interest rates to deal with (potential) stagflation," Liu told the Communist Party-backed Study Times in comments published Monday.

Stagflation is a vicious mix of low economic growth and high inflation.

This "may drag recovery of the real economy and once again cause an impact on the global financial system," he said.

Liu also warned that uncertainties remained in the Chinese economy given signs of weakening consumption, surging consumer prices and pressures on corporate revenue growth, according to the report.

He added that Chinese banks needed to "pay high attention" to loans to the real estate market and local government financing vehicles due to growing default risks as China tightens its monetary policies, it said.

Source: Agence France Presse


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