BEIJING (MNI) - The rise of China's consumer price index could exceed 5% next year as inflationary pressure gathers, a situation which could be only worsened if private sector involvement in the economy does not return, a senior government economist warned in comments published Friday.

The comments by Liu Shijin, vice-president of the Development Research Center, come days after the State Council suggested that the focus of policy-making has moved from crisis resolution to inflation fighting.

Liu was reported by the official China Securities Journal to have said that that the government will be "hard pressed to control CPI within 3% (in 2010). It could even exceed 5%."

The drop in consumer price inflation narrowed to -0.8% year-over-year in September from the previous month's -1.2%, the National Bureau of Statistics reported Thursday. Analysts expect consumer prices to move into positive territory by the end of the year.

Liu warned that a bumper domestic harvest and rising international commodities prices could add to inflationary pressure.

The inflationary picture could be also be aggravated by the absence of private sector involvement in the economy.

"Indeed, Chinese-style stagflation could emerge in the domestic economy," the newspaper reported him as saying.

Surging food prices lifted consumer price inflation to a high of 8.7% in February 2008 before falling back as the result of government oolicy tightening but also the rapidly-slowing global economy.

The State Council hinted Wednesday that the end of its loose monetary policy stance may be near, saying in a statement following a regular quarterly meeting Wednesday that the cabinet concluded that "adjusting the economic structure and managing inflation expectations are the focus of macroeconomic controls."

"For the first three quarters, our economy's performance was better than expected at the start of this year and the recovery trend has been consolidated," the State Council said.

Chinese GDP expanded by 8.9% in the third quarter, the fastest pace of growth since the outbreak of the financial crisis at the end of 2008.

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