The think tank suggested the government move to tighten monetary policy once consumer inflation surpasses 3 percent while economic growth stays below 9 percent.

M2, the broad measure of money supply, grew 25.95 percent in China by the end of April, the highest in a decade.

Overseas, the Federal Reserve, Bank of England and Bank of Japan are already purchasing government and corporate bonds in a policy known as quantitative easing. That is effectively printing money and could very likely lead to inflation once the economy recovers.

The price of New York's main futures contract, light sweet crude for delivery in July, shot to US$70.01 on Monday, more than doubling over the past three months.

Analysts say a weaker dollar and inflationary effects of quantitative easing are the main drivers of the oil price rise.

Still, most analysts say the Chinese government's focus in the short term will still remain on boosting the economy and it is unlikely to tighten monetary policy.

Zhang Xiaojing, an economist with the Chinese Academy of Social Sciences, said the CPI and the PPI fell more steeply than he expected, adding it would be a couple of months before the central bank considers raising interest rates.

Li Kang, chief economist of Xiangcai Securities, reckons that it is too early to worry about inflation, which is likely to come to the fore as early as 2010.

(China Daily June 11, 2009)