China's inflation rate at 4.9%

The Consumer Price Index (CPI), the key gauge of inflation in the world's second-largest economy, was higher than the 4.6% in December but lower than November's 5.1%.

The January figure was 'lower than market expectations', the National Bureau of Statistics said in a statement on its website on Tuesday. Food costs continued to lead the price growth, with grain prices up 15.1%, the bureau said.

Inflation causes

Xinhua, China’s official news agency, reported that the rising prices in January were partly a result of increased demand for food during the run-up to the Chinese New Year. Food costs rose 10.3 percent, the government reported.

Grain prices have become a key concern as a drought across northern China over the past four months has raised fears that the important winter wheat crop could be severely affected. Meanwhile, prices of fresh fruit grew 34.8 per cent, the bureau said.

What it means

Inflation is a concern in China where poor families spend up to half their incomes on food.

Beijing has ordered a number of measures to contain price rises, particularly inflation in food and housing costs, which have a history of sparking unrest in China although latest data did not include real estate prices.

In an attempt to rein in price growth, the central bank of China recently raised its main interest rate to 6.06% from 5.81% for the 3rd time since October, and has also raised the amount of money banks must keep in reserve a number of times over recent months.

Source: AFP, bbc, nytimes