Chinese economy is showing signs of a "soft landing" and it is likely the Chinese government will be able to keep inflation at a "reasonable" level next year, Liu Mingkang, chairman of the China Banking Regulatory Commission (CBRC), said Friday.

Liu said with the continuing effect of the government's macro control policies, China's economy is back on track for steady growth.

"But now it is increasingly difficult for us to keep our domestic economy on course of steady development under the impact of global liquidity floods and arbitrage by international capital," Liu told a financial forum in Beijing.

Liu said the current global liquidity floods and cross-border "hot-money" movements not only drove up prices of precious metals, energy, and resource commodities in international markets, but also led to over-speculation on farm produce such as mung beans and garlic in China's domestic market, as well.

"Such moves have seriously disrupted the market order and they have adverse effects on the economy," Liu said, adding: "Besides, capital continues to flow into the property market, trying to profit from hikes of asset prices."

Driven by sharp increases in food and commodities prices, China's consumer price index (CPI), a measure of inflation, accelerated to a 28-month high in November of 5.1 percent, well above the government's full-year target of 3 percent.

Food prices account for one-third of China's monthly CPI calculations and contributed to three-quarters of November's year-on-year jump in inflation.

High inflation also added pressure on the Chinese government to take actions to stabilize prices in a country with 1.3 billion people, who fear inflation will spread beyond food to a wider range of consumer goods.

The Chinese policy-makers have repeated their words recently on curbing further rises of prices in the coming year, vowing to make stabilizing prices a priority for 2011.

Last week, the People's Bank of China (PBOC), or the central bank, announced it would raise banks' reserve requirement ratio for the sixth time this year by 50 basis points to 18.5 percent beginning Dec. 20, the latest in a series of steps to steer money and credit growth back to normal in a bid to rein in inflation.

Liu said China's current inflation was structural and cyclical, but the nation's ability to curb inflation is "relatively strong" and inflation can be kept in a "reasonable and acceptable" range next year.

"That still poses a challenge to our economic policies and management of various sectors," he said.

Liu expected more volatility in commodity and asset prices next year as loose monetary policies in developed economies have fanned liquidity floods into emerging markets, where speculative funds are seeking returns higher than those available in developed nations.

"The emerging markets might face unprecedented pressure of 'hot-money' inflow next year and cause major trouble for them if not handled properly," Liu added.

(Xinhua News Agency December 18, 2010)