Though high inflation in unlikely in 2010, still China must closely watch for liquidity-driven asset price rises, Fan Gang, academic member of the People's Bank of China's monetary policy committee, told a financial forum. Also the country needs to protect against sudden capital inflows from investors, he added.

On Monday, highlighting the ongoing debate on currency, an adviser to its central bank said that Yuan has no reason to depreciate, whether against the dollar or other currencies.

Countering the consideration by the other countries about the Chinese currency CNY=CFXS to be undervalued, giving exporters an unfair advantage in global trade, domestic analysts said that weak exports actually signify stronger Yuan.

Fan believed China's low inflation, low government debt level and rising productivity to be responsible for Yuan's strength in the market. Adding his personal views, he insisted that the government needs to take balance of the domestic economy into consideration while setting foreign policies.

Beijing has pledged to stick to its fiscal stimulus and accordingly change its monetary stance. Also it will enhance the flexibility of its policies in 2010, which is being cited as mild tightening by many analysts.

Fan said the Chinese economy would grow 8-9 percent in 2010, touching 11 percent year-on-year in the first quarter.