China's central bank warned Monday the European debt crisis might pose a challenge to the world economy and that China faces rising inflationary pressure.

Europe's debt crisis, which affected directly economic growth in the Euro zone, had created major uncertainties for the global economic recovery and led to a chain reaction and posed a systemic risk to the world economy, said the quarterly monetary policy report published on the People's Bank of China website.

It also warned of increasing price pressures for China due to rising commodity and labor costs and ample liquidity in the global market.
"The potential threat to price stability is increasing", the report said.

However, the report said China's economic recovery was further consolidated, and that urbanization and improved consumption were expected to be the new momentum to push the economic growth.

The central bank would keep its moderately easy monetary policy and strengthen flexibility to changing circumstances, and it would intensify management of liquidity, said the report.

The government will release data for consumer price index (CPI), a major gauge of inflation, on Tuesday.