China's inflation spurted to a 16-month high in February, adding to pressure on Beijing to prevent overheating and keep the recovery in the world's third-largest economy on track.
China's consumer price index (CPI) rose by 2.7 percent in February from a year earlier, up from January's 1.5 percent increase, the National Bureau of Statistics announced Thursday.
That exceeded most analysts' forecasts and was driven by a 6.2 percent jump in food costs.
Tao Wang, China economist for UBS in Beijing, said the increase largely reflected a low base of comparison in February 2009, when the economy was at its nadir.
A spike in inflation over the past four months is forcing Beijing to divide its focus between boosting growth and preventing overheating.
Chinese leaders are trying to do that without hiking interest rates, which could slow growth and affect China's trading partners by denting demand for foreign consumer goods and industrial materials.
"There are lots of signs that price pressure is building in the Chinese economy sooner than expected, and that's going to be a concern for the government," said Tom Orlik, an analyst in Beijing for Stone & McCarthy Research Associates.
The UBS economist forecast a rate hike "should happen relatively soon, if not this month then probably early in the second quarter", according to a Reuters report.
Premier Wen Jiabao said last week the government hopes to hold overall consumer price rises to 3 percent this year.
China recovered from the global crisis after growth rebounded to 10.7 percent in the final quarter of 2009. But authorities say stimulus spending and easy credit will continue because the global outlook is still uncertain.
Chinese leaders worry the flood of stimulus money and bank lending is fueling a dangerous bubble in prices of stocks and real estate.
Regulators have tightened controls on bank lending and tried to prevent a surge in credit by ordering institutions to set aside more reserves.
Total lending by Chinese banks in February fell to 700.1 billion yuan ($102.6 billion), down by half from January's level after credit controls were tightened, the central bank reported Thursday.
The statistics bureau blamed the latest price jump on bad winter weather that hurt food production and said pressure should ease once spring harvests come in.
"So far there is no overheating in the economy," said a bureau spokesman, Sheng Laiyun, at a news conference. "Although February CPI rose faster than before, it is still mild to moderate."
Still, the data showed February's wholesale inflation accelerating to 5.4 percent, up from January's 4.3 percent, which could lead to more retail price hikes.
Housing price inflation also accelerated in February, with costs in 70 Chinese cities rising by 10.7 percent over a year earlier, up from January's 9.5 percent rate, the government reported earlier.
"Inflation is expected to trend higher in the next several months before peaking around midyear," said Jing Ulrich, JP Morgan's chairwoman for China equities, in a report.
Analysts expect China to raise interest rates this year but say the central bank probably wants to wait until the Federal Reserve boosts US rates, a signal that a global recovery is firmly established.
That also could help to avert an influx of speculative foreign money meant to profit from higher Chinese interest rates.
Chinese banks issued 700.1 billion yuan ($102.6 billion) in new yuan-denominated loans in February, down 34.67 percent from 1,070 billion yuan a year earlier and almost by half from January's 1.39 trillion yuan, the People's Bank of China announced Thursday.
Analysts attributed the decline to repeated government calls to rein in lending for fears of inflation and bad loans.
New loans had neared 600 billion yuan before Feb 13 - the start of the week-long Lunar New Year holiday, Shanghai Securities Journal reported earlier.
The broad M2 measure of money supply, which covers cash in circulation and all deposits, went up 25.52 percent in February from a year earlier to 63.6 trillion yuan, 0.56 percentage point lower than the rate in January, the central bank said.
The narrow M1 measure of money supply, which covers cash in circulation plus current corporate deposits, rose 34.99 percent year-on-year to 22.43 trillion yuan, 3.97 percentage points lower than the growth in the previous month, it said.