China’s inflation surges 7.1%, highest in 11 years

China’s inflation rose to its highest level in more than 11 years in January after devastating snowstorms worsened food shortages, according to data reported Tuesday, and analysts warned there might be sharper increases to come.

Consumer prices in January climbed 7.1% from the same month last year, driven by an 18.2% rise in costs, the National Bureau of Statistics reported.

Economists warned that despite efforts to ease food shortages, China faces pressure for prices to rise across the board because of higher wages and costs for coal, iron ore and other industrial materials.

February inflation “is likely to be much higher than 7% and might even get close to double-digit levels,” said Goldman Sachs economists Yu Song and Hong Liang.

High inflation could complicate Beijing’s efforts to keep the fast-growing economy from overheating and add to pressure to let the exchange rate of its currency, the yuan, rise faster. China’s economy grew by 11.4% in 2007 and was expected to expand by at least 9% this year.

Surging food costs are a political concern for Chinese leaders because they hit the poor majority hard in a society where families spend up to half their incomes on food.

Bouts of high inflation in the 1980s and ‘90s sparked protests, which the government hopes to avoid repeating.

Economists expect interest rate hikes this year but say they should be modest because the key factor driving inflation is shortages of pork and some other food, rather than too much credit.

Beijing has nudged up rates over the last two years to cool a lending boom.

The yuan has risen by 13% against the dollar since 2005.