Pay attention to equity bubbles: central banker

China's central bank governor Zhou Xiaochuan said the regulators should keep vigilant against a slew of risks including excessive loaning, equity bubbles and a cyclical rise in bad bank loans.

Addressing a financial forum in Shanghai on Thursday, Zhou also urged efforts to cap the rising inflationary pressure, which erodes the livelihood of the growing middle class in the country. China's inflation picked up pace to reach 3.6 percent in September.

Growth of the world's second-largest economy slowed down in the third quarter, indicating that regulators are well in control and at ease to see the economy cool down, to avoid overheating and assist industrial structural advance.

The data published on Thursday was broadly in line with forecasts, but was still something of a surprise after China's unexpected rate rise on Tuesday prompted speculation growth and inflation would be much stronger than expected.

Economic growth dipped to 9.6 percent in the third quarter from a year earlier, down from 10.3 percent in the second quarter, data from the National Bureau of Statistics showed. The consensus expectation was a 9.5 percent rise. Much of the slowdown can be explained by a higher base of comparison after China's strong rebound beginning the third quarter last year.

Annual inflation rose in September to 3.6 percent, reaching a 23-month high and smack in line with forecasts. But industrial output -- a key indicator of growth momentum -- eased to a 13.3 percent year-on-year increase, its lowest pace in 13 months.
China surprised global markets on Tuesday as it attempted to cool asset prices with its first increase in interest rates since late 2007.

In comments published on Thursday, central bank governor Zhou Xiaochuan drew attention to a series of potential pitfalls. "Macro-economic risks linked to excessive liquidity, inflation, asset bubbles and a cyclical rise in bad bank loans are rising significantly," he said.

Whether the central bank will raise rates again is what the markets care about, and that would possibly depend in large part on the property sector. Despite a months-long campaign to crack down on speculative buying, housing prices have started to climb again and the government is determined to calm the market.

China's inflation is not broad based. Food prices, which account for a third of the country's consumer price index, rose by an annual 8.0 percent in September, while core non-food inflation slowed to 1.4 percent from 1.5 percent a year earlier.
With food prices still climbing, October's inflation reading could be higher again, but that could be the peak.

By Jimmy, People's Daily Online