Reversing trend, China's inflation rises to 4.5 per cent

China National News Thursday 9th February, 2012

BEIJING - China's inflation rose to 4.5 per cent in January with soaring food prices contributing significantly to the reversal of a five month trend of easing prices.

Inflation in December was 4.1 per cent.

Data released Thursday by China's National Bureau of Statistics showed that most of the inflationary pressure came from food inflation, accounting for a third of the inflation measurement, which rose sharply to 10.5 per cent as against 9.1 per cent in the previous month.

China's inflation rate for 2011 calendar year was 5.4 per cent, higher than the targeted 4 percent.

Rising prices and higher than desired inflation, could prove a dampener to the government's efforts to revive growth that dropped to a two-and-a-half low of 8.9 per cent in the last quarter of 2011.

Fear of high inflation has been holding back government efforts to boost growth at a time when global economic outlook is not too bright and has been impacting Chinese exports.

Earlier this week, International Monetary Fund had cautioned that China's projected growth could be cut in half if Europe, Beijing's biggest trading partner, is not able to come to grips with its debt problems and registers a further dip in economic growth.

The global body had urged China to be prepared for giving a stimulus package to put economy back on high growth track.

The new inflation data comes at a time when the investors were expecting People's Bank of China to ease key policy rates to signal a push for higher growth through a boost for investments.

Experts feel seasonal factors including the shopping frenzy ahead of the Chinese New Year celebrations on January 23, are responsible for the spike in food prices. There are wide expectations that the downward trend in inflation will resume soon.