The country is trying to boost consumption and prevent deflation as weak spending, a slumping property market and rising debt negatively impact economic growth.

The consumer price index (CPI), which is the main gauge of inflation, rose 0.5% last month, compared with 0.1% in November, according to the National Bureau of Statistics.

January's reading, which coincided with the start of the long Lunar New Year holiday this year, was the highest since August, when the reading was 0.6 percent.

Last month's reading exceeded the 0.4 percent rise forecast by Bloomberg analysts.

The NBS (National Building Specification) reported a rise in prices of goods associated with the holiday, when millions of people travel to their hometowns and celebrate with feasting and drinking.

Fresh vegetable prices rose 2.4% year-on-year, while that of pork rose 13.8%.

This rise last month "was mainly due to higher food prices and tourism-related service prices during the earlier-than-usual Lunar New Year holiday," Goldman Sachs analyst Xinquan Chen wrote.

"But the increase is likely to turn negative in February as seasonal demand weakens," Chen added.

In January 2024, at the end of a four-month period of deflation, China suffered its sharpest price decline in 14 years.

In the nine months of 2024, inflation remained below 0.5 percent.

While deflation indicates that the price of goods is falling, it poses a threat to the wider economy as consumers tend to delay purchases in such conditions, hoping for further reductions.

Lack of demand may force companies to cut production, freeze hiring or lay off workers, possibly having to reduce existing inventories - this reduces profitability even if costs remain the same.

Last year, Beijing took a number of measures to stimulate the economy, including cutting interest rates and lifting restrictions on home purchases.

Last month, policymakers expanded a subsidy scheme for common household goods, from water purifiers to laptops and electric cars.

During the holiday period, sales of household appliances and communications equipment at "key monitored retail enterprises" rose more than 10 percent year-on-year, China's Ministry of Commerce said. | BGNES