(chinadaily.com.cn)
Updated: 2008-03-11 10:09

China's consumer price index (CPI), the major gauge of inflation, hit a new 11-year high of 8.7 percent in February on the back of skyrocketing food prices, announced the National Bureau of Statistics (NBS) today.

Food prices, which account for one-third of the CPI basket, surged 23.3 percent in February, led by a 45.3 percent and 46.0 percent year-on-year rise in meat and vegetible prices.

The worst snowstorms hitting central and southern China could have played a vital role in the price rises because inclement weather destroyed crops and disrupted transport in a large part of the country.

Amid concerns that inflation is becoming more entrenched after yesterday release of producer prices figures, the major Chinese stock index lost 154.22 points or 3.59 percent to close at 4,146.30.

China's producer price index, a key inflation indicator, rose 6.6 percent in February over the same month last year due to surging crude oil prices, the NBS said yesterday. The index, which measures the cost of goods when they leave the factory, compares with January's 6.1 percent, the biggest rise in three years.

The CPI rose 7.1 percent in January. The world's fourth largest economy expanded 11.4 percent last year, the sixth consecutive year of double-digit growth.

To bring down the inflation and slow down the galloping economy, the central bank raised interest rates six times and the bank reserve requirement 11 times since the start of 2007.

The red-hot figures triggered speculation of a modest hike in interest rates. The central bank chief Zhou Xiaochuan refused to rule out the possibility of further interest rate hikes last week, while pledging to be cautious in using this monetary tool.