China's CPI hits new hight of 8.7 percent in February 2008. (Photo: CNSPHOTO)

China's inflation rate has continued to accelerate, with the consumer price index (CPI) up 8.7 percent year-on-year in February, the biggest jump in nearly 12 years, the National Bureau of Statistics (NBS) said on Tuesday.

The main inflation indicator last month was second only to the figure recorded in May 1996, when it stood at 8.9 percent. It rose by an annual rate of 14.11 percent from 1992 to 1996.

The figure, compared with 7.1 percent in January, was well above market expectations. For example, the Bank of China, the country's second-largest lender, had predicted a rise of 8.3 percent.

The price rises added to the difficulty China had in reining in the full-year inflation rate, the NBS said in a statement. It called for a "cool-headed" response and more effective measures to keep the overall price level from rising too fast.

NBS chief economist Yao Jingyuan ascribed the jump mainly to soaring food prices, Lunar New Year shopping and the severe winter weather that affected many parts of China in January and February.

Food prices surged 23.3 percent in February, with pork prices up 63.4 percent and vegetable prices up 46 percent, contributing more than 80 percent of the CPI increase.

Non-food prices edged up only 1.6 percent from a year earlier.

Also, the base of comparison last month was low because of the relatively small CPI rise of 2.7 percent in February last year, Yao said.

"The index is likely to fall in March," said Fan Jianping, a researcher with the State Information Center. "But the impact on inflationary trends will persist as output and supplies decline."

The unusually harsh winter had dealt a serious blow to vegetable and rapeseed crops and frozen many pigs and chickens to death, he added.

About 7 million hectares of farmland had been affected by the end of January, according to the Agricultural Ministry. Some 874,000 pigs, 85,000 cattle, 459,000 sheep and 14.4 million poultry had died.

However, Song Guoqing, a professor at the China Economic Research Center at the Peking University, said that the excessive growth of money supply, not the weather, was the main factor fueling the CPI increase.

"Central bank measures, including repeated hikes in interest rates and the bank reserve ratio requirement, have not been strong enough to check the fast-growing money supply," he said. The trade surplus and foreign reserves had been expanding rapidly, he said, generating inflation pressures.

But China's monthly trade surplus shrank to 8.56 billion U.S. dollars in February, one third of the level in the same month last year, largely due to weakening U.S. demand dampened by the sub-prime mortgage crisis.

As part of its fight against inflation, China raised the bank reserve ratio requirement 11 times and interest rates six times since last year.

The Bank of China forecast that China was likely to raise the interest rates once or twice in the first half of the year.

Song added that the figures for the first two months of the year would make it difficult for the government to keep the full-year inflation rate under its target of 4.8 percent.

The CPI rose 4.8 percent last year, the highest rate since 1997and well above the target of 3 percent, while the economy grew 11.4 percent.

Premier Wen Jiabao announced last week that the government would strive to keep the 2008 inflation rate at about 4.8 percent. He noted that inflation was a top concern for China's 1.3 billion people.

Although pork prices would remain high for some time, production was gradually recovering and market supply of farm products would be ensured, according to the Agricultural Ministry.

Editor: Yan