"The current CPI growth rate target of 3 percent will be difficult to rein in over the next few years," said Wang Jianmao, Professor of Economics at the China Europe International Business School. Loose domestic monetary policies have resulted in excessive liquidity, causing prices to increase over the previous year. Government investment will edge out private investment in several areas, according to Wang.

The home prices saw an average increase of 23.5 percent in 2009, which will definitely push up the rents. The impending property taxes may curb the upward spiral of property prices to some extent, but would add momentum to the sharp rent rises.

New reforms targeting the prices of labor and capital will also occur in 2011, causing these previously underpriced resources to increase in cost.

Internationally, the exchange rate of the renminbi (RMB) against the U.S. dollar will keep rising as dollar depreciates. The best bet for U.S. monetary policy makers is to make the dollar depreciate while maintaining its dominant position. The United States might use its quantitative easing monetary policy to force other countries to appreciate their currencies.

China's economic growth is set to slow down in 2011, while other developing countries will maintain high growth rates. Wang believes that these other countries will see economic breakthroughs similar to that seen by China in recent years, which will lead to a rise in energy prices, further pushing up China's CPI.