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China's central bank is warning of potential domestic inflation risks, due to complicated situations both at home and abroad.
In its second quarter monetary report, the central bank says increases in the cost of labor and environmental requirements, combined with continuing progress on reforms in the pricing of resource products, will likely impact the inflation expectation.
The central bank also points out that external "hot money" may push up price hike pressures. Nations across the world have been prudent in their stimulus exits due to continuing uncertainties in the economic recovery. Excessive money is likely to seek various outlets, adding to the potential risk of inflation expectations.
Lian Ping, Chief Economist of Bank of Communications said "The CPI may gradually drop after reaching a high in July and August, because in general, factors pushing prices up are waning. But we should note there are some factors giving pressure to price levels internationally. For example, the price of crude oil is rising, and other commodities are also likely to see price hikes."