Chinese inflation hits 11-year high

China's inflation rate rocketed to its highest level in more than 11 years in January as the coldest winter in half a century…

China's inflation rate rocketed to its highest level in more than 11 years in January as the coldest winter in half a century put pressure on food supply and stymied efforts to keep prices under control.

Consumer prices in January spiked 7.1 per cent from the same month last year, driven by an 18.2 per cent rise in food costs, according to the National Bureau of Statistics, and there were warnings that worse price increases may be on the way.

"The CPI was mainly driven up by factors including the snow disaster that ravaged more than half of the country and food price hikes during the Spring Festival," said Yao Jingyuan, chief economist at the statistics office.

China's economy grew 11.4 per cent in 2007 - a 13-year high - and is expected to expand by at least 9 per cent this year.

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The general view is that inflation, which has often led to widespread social unrest in China, looks set to worsen in the early part of this year. The cost of pork, a staple in the Chinese diet, surged nearly 60 per cent year on year.

January saw eastern and southern China blasted by the worst blizzards in 50 years, destroying crops, disrupting the supply of goods and hitting power lines to factories.

Song Guoqing of Peking University's China Economic Research Centre told the Xinhua news agency the bad weather began too late in January to have had more than a limited impact on prices. "The influence of the snow disaster may emerge in the longer term," he said, predicting that February's CPI might exceed 8 per cent.

Goldman Sachs economists Yu Song and Hong Liang agreed that February inflation was likely to be much higher. "Inflation is likely to have further legs to run," they wrote in a research note.

High inflation will put further pressure on the government to stop the economy from overheating.