Chinas Zentralbankchef besorgt über Blase am Aktienmarkt

BASEL, Switzerland, May 6 (Reuters)

Chinese central bank chief Zhou Xiaochuan acknowledged on Sunday that a bubble in the country's stock market was a concern and said the central bank is monitoring asset prices along with inflation.China's stock market is up more than 40 percent since the start of the year, and the valuations of many equities are high compared with international benchmarks and historical levels.Asked if he was concerned about the build-up of a bubble in China's stock market, Zhou said, "Yes."

"For currency stability, we watch over CPI (Consumer Price Index), PPI (Producer Price Index) and also asset prices," said Zhou, governor of the People's Bank of China.

The Shanghai Composite Index <.SSEC> has surged about 235 percent since the start of 2006 but has also shown some volatility, including a 9 percent fall in February that led to market declines worldwide.

Zhou spoke on the sidelines of a central bankers meeting at the Bank for International Settlements (BIS) in the Swiss city of Basel.He also said he expects China's inflation in 2007 would be higher than in 2006 but that the situation was still manageable."There is no evidence to say inflation is out of control," he said. "We are very closely watching annual inflation rates." Annual consumer price inflation hit 3.3 percent in March, the first time it climbed above 3 percent in more than two years.

Zhou said the "seasonal character" to China's inflation pattern meant prices would likely decline in the second quarter of the year after the Chinese New Year drove higher prices in early 2007.Asked if China would consider further interest rate hikes to dampen liquidity, Zhou said it was "not convenient" to talk about rate policy.