PBOC sees dollar strength and inflation

China's central bank expects the dollar to strengthen this year, but it raised the specter of worldwide asset bubbles and inflation.

The People's Bank of China warned on Friday in its report on the global financial markets, that huge, hidden bank bad loans in the West could pose a threat to the global economy.

The central bank said the ultra loose monetary policies, including quantitative easing adopted by major central banks, pumped huge liquidity into the global financial markets.

Once the real economy turns positive, the massive liquidity will definitely add to inflationary pressure. The central bank says it is an urgent task faced by central banks around the world to avoid forming of asset bubbles and inflation.