Economists see speed bumps ahead for the mainland economy, fearing that a surge in domestic demand may force the government to clamp down on unbridled growth. Inflation picked up last month as key economic growth indicators such as industrial production, retail sales and imports rebounded. As a result, the authorities have allowed measured increases in the yuan to send the currency to its highest exchange rate in more than 15 years. Nomura International lowered its growth forecast for China to 10.2 per cent this year from 10.5 per cent, citing the government's commitment to economic reform. It also cut its 2012 target to 9.5 per cent from 10.5 per cent. 'We detect a recent shift in focus to accelerating structural reforms in a bid to improve the quality - and hence sustainability - of growth,' Tomo Kinoshita and Chi Sun, economists at Nomura, wrote in a report released Friday. 'Such policy orientation may cause some downside risk to short-term growth.' Beijing revived the economy last year by pumping in liquidity and approving fixed-asset investments. It has since been caught between a rock and a hard place, trying to preserve growth while trying to stamp out speculation. Rising inflation could force the authorities to make a stand, however. The consumer price index rose the most in nearly two years last month, by 3.5 per cent from the same period last year. Inflation is now higher than the benchmark interest rate, so people may be more inclined to speculate on the market rather than keeping it in the bank. 'Inflation is making Beijing uncomfortable,' Dong Tao, an economist at Credit Suisse, wrote in a report last week. 'Stubbornly high inflation and negative real interest rates may eventually force the central bank to raise both lending and deposit rates.' He expected China to increase its deposit and lending rates in the fourth quarter and to ask lenders to raise their required reserve ratios. Meanwhile, Morgan Stanley raised the spectre of a long-term ease in expansion on the mainland. Its economists including Qing Wang said in a report yesterday that an average annual growth rate of 8 per cent over the next decade is 'a sustainable level'. They highlighted a projected decline in labour supply growth and a lower savings ratio as causes for long-term concern. 'The Chinese economy is now at an inflection point similar to that of the Japanese economy 40 years ago and the Korean economy 20 years ago,' the report said. 'If history is a guide, the overall [gross domestic product] growth tends to decelerate and inflation to accelerate.' Morgan Stanley said in an earlier report that China's batch of economic data for last month was better than expected and its economy was on track for 9.1 per cent year-on-year growth rates in the third and fourth quarters. It forecast the economy would grow 10 per cent this year and 9.5 per cent next year.