BEIJING (AFP) — China's inflation rate soared to its highest level in over 11 years in January as the coldest winter in decades sabotaged long-running efforts to tame rising prices, official data showed Tuesday.
The nation's main inflation gauge spiked to 7.1 percent last month, the National Bureau of Statistics said, pushed up by an 18.2 percent rise in food prices, with the cost of pork jumping 58.8 percent compared with a year ago.
The rise in the consumer price index coincided with the start of three weeks of freak winter weather in January that hit China's south and southwest, destroying crops and disrupting power and transport networks.
The ice and snow storms came just ahead of the Lunar New Year, a time when prices traditionally tend rise due to the holiday period that this year fell in early February.
"The CPI was mainly driven up by factors including the severe snow disaster that ravaged more than half of the country," the official Xinhua news quoted Yao Jingyuan, the chief economist of the statistics bureau, as saying.
But it also reflected a trend that worsened throughout 2007, despite a wide range of government measures aimed at keeping a lid on prices and reining in the nation's economy, which expanded at a 13-year high of 11.4 percent.
As part of those efforts, China last year raised interest rates six times and, over the past 13 months, increased the amount of money commercial banks needed to set aside in reserves 11 times.
A temporary cap was also put on some commodity prices in January but, following Tuesday's data, analysts said more measures were undoubtedly on the way.
"Policymakers in China will likely try to tighten monetary policy further, with more reserve requirement ratio hikes, faster Chinese yuan appreciation, and more heavy-handed controls over bank lending," said Goldman Sachs analyst Hong Liang.
However the general view was that inflation -- a particular source of concern in communist-ruled China for fear the problem could cause social unrest -- would worsen in early 2008.
"This is not the peak. The peak will probably be in February, because China suffered more in February from the ice and snow storms," said Chen Xingdong, a senior economist at BNP Paribas in Beijing.
"We all understand that the winter disaster has caused a lot of damage to agricultural crops and transportation."
The figure for January was already up from the 6.5 percent seen in December last year and was the highest since September 1996, when the index rose 7.4 percent.
Another key sign that the inflation problem is worsening was data released Monday showing China's producer or wholesale prices were up 6.1 percent last month from a year earlier, the fastest increase in over three years.
"Energy costs, raw materials, mineral products are all shooting up. Labour costs are also increasing. These have to translate into inflation in one way or another," said BNP Paribas's Chen.
The higher prices are especially untimely because the galloping inflation rate comes as a weakened US economy may reduce the globe's appetite for Chinese exports, making it more difficult to implement effective monetary policy.
As China struggles to control rising prices, there are also increasing concerns that it is exporting its inflation problem.
With the cost of raw materials, food and energy rising in China, its vast array of exports are in danger of becoming far more expensive.
"The increasing costs are now moving to exports and export prices, so I think we will see China contribute (more) to world inflation," said Chen.
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