China inflation hits 3-year high at 14.4%

China's inflation hit a three-year high of 6.4% as the food inflation jumped to 14.4%, raising concerns over the impact it will have on salaried classes, the mainstay of China's population.

China's consumer price index (CPI), the main gauge of inflation, rose 6.4% year-on-year in June, the highest level since June 2008, the National Bureau of Statistics (NBS) said today.

Of the 6.4% CPI growth in June, 3.7 percentage points were contributed by the carryover effect of price increases last year, the NBS said.

Food prices, which account for nearly one third of the basket of goods in the nation's CPI calculation, jumped 14.4% in June from the same month last year, a pace faster than May's 11.7%.

Growth in non-food prices also accelerated to 3% in June, up from 2.9% in May.

An adverse impact on food and real estate prices could cause unrest among the middle and lower middle classes in the country, whose salaries are in the margins.

In terms of regions, the CPI rose 6.2% year-on-year in China's urban areas and the growth in the rural areas was 7%, according to the NBS.

On a month-on-month basis, food prices added 0.9% from May, with the pork prices jumping 11.4% from May.

Month-on-month price decline were reported in vegetables and fruits. Non-food prices were flat in June as compared with May.

"We don't have to panic about the June CPI figure," Zhang Liqun, a macroeconomic analyst with the State Council Development Research Centre, China's top government think-tank said.

"A CPI growth above 6% does not mean the inflation situation is worsening in China, because 3.7 percentage points of the increase were contributed by the carryover effect," Zhang told state run Xinhua.

He said the carryover effect peaked in June and new factors that push up prices have been under the government's control.

Except for pork, the supplies of other food are improving and will help ease inflation pressure, Zhang added.