China’s rate of inflation hit its highest level in 11 years last month as a freezing cold winter destroyed crops and pushed up food prices.

The country’s National Bureau of Statistics said that inflation rose to 7.1 per cent in January, driven by an 18.2 per cent rise in food prices, with the cost of pork climbing 58.8 per cent compared with a year ago.

Three weeks of some of the coldest weather on record combined with the traditionally high prices in the run up to the Lunar New Year, resulted in the highest level of inflation since September 1996, when it was 7.4 per cent.

“The Consumer Price Index (CPI) was mainly driven up by factors including the severe snow disaster that ravaged more than half of the country,” Yao Jingyuan, the chief economist of the statistics bureau, said.

Bad weather also disrupted power supplies and transport networks.

China’s efforts to slow down the growth of its economy, which expanded at a 13-year high of 11.4 per cent last month, also added to the price increases.

The country has raised interest rates six times in the last 13 months and told commercial banks to put 11 times more money into reserves.

Analysts expect inflation to worsen still in 2008 as the government continues with similar measures.

“Policymakers in China will likely try to tighten monetary policy further, with more reserve requirement ratio hikes, faster Chinese yuan appreciation, and more heavy handed controls over bank lending,” Hong Liang, an analyst at Goldman Sachs, said.

Economists also fear that continuing bad weather this month will drive inflation higher.

“This is not the peak. The peak will probably be in February because China suffered more in February from ice and snow storms,” Chen Xingdong, a senior economist at BNP Paribas in Beijing, said.

“Energy costs, raw materials, mineral products are all shooting up. Labour costs are also increasing. These have to translate into inflation in one way or another,” Chen added.

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