SHANGHAI stocks bucked an eight-day winning streak yesterday after closing lower following a central bank warning that inflation pressure may rise as China's economy recovers.

The Shanghai Composite Index shed 0.66 percent to close at 2,418.53 points.

Prices of labor-intensive products such as services and agriculture goods may climb due to a slowing supply of workers, the People's Bank of China said in its fourth-quarter monetary policy report. The central bank also warned that the rebound in the economy and demand may fuel a rise in consumer prices.

A PBOC survey showed that 41.7 percent of residents expect prices to rise in the current quarter, up 4.7 percentage points from the third quartert.

"There is concern that a rebound in inflation will post risks to economic recovery," Essence Securities said in a report yesterday. "The report signals the central bank is more sensitive to inflation and may strengthen measures to respond to price movements."

Though profit taking occurred ahead of the week-long Spring Festival holiday starting tomorrow, Damo Investment Co said yesterday the long-term outlook is optimistic due to sufficient liquidity.

China Minsheng Banking Corp lost 6 percent to 11 yuan (US$1.76) after surging nearly 90 percent since December 4. The Industrial and Commercial Bank of China, the nation's largest bank, fell 2 percent to 4.33 yuan, and Shanghai Pudong Development Bank declined 4.8 percent to close at 11.43 yuan.