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China's coldest winter in decades drives up inflation

January 11, 2013|By David Pierson
  • A Chinese farmer harvests vegetables in her field in a rural area of Qingdao, in eastern China's Shandong province.
A Chinese farmer harvests vegetables in her field in a rural area of Qingdao,… (Wu Hong )

BEIJING -- China’s coldest winter in nearly three decades sent vegetable prices soaring and drove inflation to a seven-month high in December.

Consumer prices rose 2.5% from a year earlier, China’s National Bureau of Statistics said Friday, up from 2% year-on-year growth in November.

Rising inflation could restrict China’s ability to stimulate growth if its tepid recovery loses momentum.

Higher food prices also worry the Chinese government because of their impact on social stability. Chinese households spend more than 20% of their income on food, more than three times as much as U.S. households, according to the American Enterprise Institute.

China has been battered by a deep chill in recent weeks that has killed off livestock and ruined crops.

Vegetable prices rose 17.5% from November, contributing to 57.5% of the consumer price index’s growth last month.

"Many places saw their temperatures drop to historical lows," Yu Qiumei, a senior analyst for the statistics bureau, said in a statement. "Frequent snow in the north and rainy and gloomy weather in the south impacted the production, transportation and sales of vegetables."

Analysts said prices for food probably will continue to rise as demand soars during the Chinese New Year national holiday next month before leveling off.

Food prices aside, economists noted that inflation was modest and would remain manageable for the remainder of the year.

“In all, we are still not particularly concerned about high inflation in 2013,” Louis Kuijs, an economist for the Royal Bank of Scotland, said in a research note Friday.     

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