By Bloomberg News Dec. 23 (Bloomberg) -- China’s growth may surge to as much as 12 percent next year, increasing the risk from inflation, unless the government raises interest rates, Citic Securities Co. Chief Economist Zhu Jianfang said. The nation’s economy may be boosted by a rebound in exports and domestic spending next year, Zhu said. He expects the benchmark rate to increase by between 27 basis points and 54 basis points from the benchmark one-year lending rate of 5.31 percent. A basis point is 0.01 percentage point. “We will see a change in monetary policy next year, otherwise, the growth will reach 12 percent, which will be a bit too fast,” Zhu said in an interview after his presentation at a forum in Shanghai. A record 9.2 trillion yuan ($1.3 trillion) of loans in the first 11 months of this year drove a recovery in the world’s third-biggest economy and increased the risk of bubbles in property and stocks. The Shanghai Composite Index surged 68 percent this year, while home prices in 70 major Chinese cities rose at the fastest pace in 16 months in November. The economy may expand 10.1 percent next year with higher interest rates, Zhu said, increasing from his forecast of 8.6 percent growth in 2009. Economists estimate rates may increase 54 basis points next year, according to data compiled by Bloomberg. Gains in housing prices have prompted the government to come up with measures aimed to curb speculations in the property industry. The government will target “excessive” growth in property prices in some cities, Xinhua News Agency reported last week. Reserve Ratio Chinese central bank Governor Zhou Xiaochuan said yesterday reserve ratios are a tool “which we still put quite some emphasis upon.” The nation is targeting 8 percent growth in 2010 amid a “fragile” global recovery, industry minister Li Yizhong said on Dec. 21. The Shanghai Composite has fallen 4.1 percent this month, the worst performer among the so-called BRIC nations that also include Brazil, Russia and India. “The market would fall much lower than people expect, if the government continues to crack down on the property market and tighten liquidity,” said Zhang Gang, a strategist at Central China Securities Holdings Co. in Shanghai. --Zhang Shidong. Editors: Linus Chua, Paul Panckhurst To contact Bloomberg News staff for this story: Zhang Shidong in Shanghai at +86-21-6104-7014 or szhang5@bloomberg.net

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