Fears that China may export inflation to the rest of the world were heightened yesterday when Beijing announced the sharpest rise in the cost of living in 11 years.
With food prices rising rapidly following severe new year storms, the annual inflation rate in the fast-growing developing economy reached 7.1% last month.
Food prices were up 18% on January 2007 as blizzards took 7m hectares of agricultural land out of production and paralysed distribution systems across China.
There are major concerns that the price rises in food in China will spread to the rest of the economy, which will be a problem for countries that import chinese goods. This will create pressure for the exchange rate of it's currency, the yuan, to rise even more.
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