Inflation risk low in 2013 owing to slower growth: HSBC

China's inflation risk is controllable because of the country's slower economic growth rate compared with the past decade, HSBC said at a press conference Thursday, adding that an interest rate hike in 2013 is unlikely.

China's economy is expected to rebound mildly to growth of 8.6 percent in 2013, a relatively modest level compared with an average of 10 percent annual growth over the past decade, said Qu Hongbin, chief China economist at HSBC.

HSBC's forecast is similar to those of many other foreign financial institutions including Deutsche Bank, Credit Agricole and DBS Group, most of which predict growth ranging from 8.2 to 9 percent.

"The inflation risk is much lower (in 2013) than in 2009-10," Qu said, as long as the growth rate is less than 9 percent and social financing - a broad measure of liquidity in the economy - is kept under control.

According to official data, the consumer price index (CPI), a main gauge of inflation, rose 2.5 percent in December, the highest since June 2012, sparking market concerns about a possible rebound in inflation.

China saw a sharp rise in inflation in mid 2011 with a CPI reading of 6.5 percent, the highest since the pre-crisis level in June 2008, as a result of a huge government stimulus package.

To attain a mild growth rate, policymakers are expected to extend tax cut measures, stabilize the moderate growth of investment and stick to a relatively loose monetary policy, Qu noted.

To cope with inflation concerns, the central bank will most likely raise the reserve requirement ratio rather than raising the interest rate, he said.

The biggest challenge for China's economy this year is still the weak external demand, as the US economy faces slowing growth and the European economy is projected to suffer negative growth, Qu said.