BEIJING, Nov 20 (Reuters) - Asset prices are likely to rise strongly in China next year and policymakers will have to focus on preventing bubbles, a government economist said on Friday.
Wang Yiming, deputy head of the macro-economic research institute under the National Development and Reform Commission, was the latest Chinese official to warn that soaring stock and property markets could complicate economic management next year.
"Consumer prices are not going to sky-rocket next year, but asset prices will see a steep upward trend," Wang said at a forum in Beijing. "How to prevent the explosion of asset price bubbles poses an important challenge to macro-economic policymakers."
China's top leadership declared last month that managing inflation expectations would be a priority next year, but many in the market suspect that they will instead gear monetary policy toward dealing with asset bubbles.
China's wide M2 measure of money supply grew a record 29.4 percent year on year in October after banks answered the government's call and boosted lending to support economic recovery efforts.
Consumer prices, which have been falling for almost the entire year, will rise in 2010 but only moderately, Wang said.
"Industrial over-capacity, spurred by policies favouring investment, will act as a price-stabilising factor," he said.
However, China's asset markets will be frothy, as capital controls make it hard for residents to invest abroad and domestic investment channels are few and far between, he said.
Fan Gang, an adviser to the central bank's monetary policy committee, told Reuters this week that speculative capital inflows could pressure Chinese property prices higher next year. For story, see [ID:nHKG249661] (Reporting by Sophia Jin and Simon Rabinovitch; Editing by Tomasz Janowski)