China consumer inflation hits 10-month high

China's consumer inflation climbed to a 10-month high last month and fixed-asset investment boomed, prompting expectations that monetary tightening may be needed in the second half of the year to cool the economy.

The consumer price index (CPI) rose 3.2 per cent last month from a year ago, pushed up by higher food prices during the Lunar New Year festival, the National Bureau of Statistics said yesterday. Consumer prices in February were 1.1 per cent higher than January.

The official inflation target is 3.5 per cent this year.

"Even factoring in the distortion of the holiday, which fell in January in 2011, the CPI level is high," Renmin University finance professor Zhao Xijun said. "Inflation pressure will mount down the road as companies pass higher labour and environmental costs onto consumers while loose monetary policies in major countries will result in excessive liquidity."

Inflation pressure is piling up as a result of China's robust growth in what Beijing calls total social financing - which covers bank loans, trust loans, and issues of bonds and equity - and quantitative easing in the United States and Japan.

Qian Yingyi, a member of the Monetary Policy Committee of the People's Bank of China, said last week the central bank "may take action to prevent boom-and-bust cycles" to combat inflation.