Inflation picked up in China last month, official figures showed Sunday, as the Lunar New Year holiday boosted January spending.

China has struggled to raise consumption and stave off deflation for months as sluggish spending, a property slump and ballooning local government debt all weigh on growth.

The consumer price index (CPI), a key measure of inflation, rose 0.5 per cent last month, up from a 0.1pc rise in November, according to the National Bureau of Statistics.

The reading from January, which coincided with the start of the long Lunar New Year holiday this year, is the highest since August’s reading of 0.6pc.

Last month’s reading exceeded the 0.4pc rise predicted by Bloomberg analysts.

The NBS reported a rise in prices for goods associated with the holiday, where millions of people travel to their hometowns and celebrate with feasts and drinking.

Fresh vegetable prices rose by 2.4pc year-on-year and the price of pork rose by 13.8pc.

The boost in prices last month is “mainly due to higher food prices and tourism-related services prices on an earlier-than-usual Lunar New Year holiday,” Goldman Sachs analyst Xinquan Chen wrote in a note on Sunday.

“But the boost is likely to become a drag in February as seasonal demand fades,” Chen said.

China suffered its sharpest fall in prices for 14 years in January 2024, at the end of a four-month period of deflation.

Inflation stayed below 0.5pc for nine months of 2024.

While deflation suggests the cost of goods is falling, it poses a threat to the broader economy as consumers tend to postpone purchases under such conditions, hoping for further reductions.

A lack of demand can then force companies to cut production, freeze hiring or lay off workers, while potentially also having to discount existing stocks— dampening profitability even as costs remain the same.

Beijing unveiled a slew of measures to boost the economy last year, including cutting interest rates and cancelling restrictions on homebuying.

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

During the holiday period, sales of household appliances and communication equipment at “key monitored retail enterprises” were up more than 10pc year-on-year, the Chinese commerce ministry said on Thursday.

China to further shrink renewables subsidies in market reform push

China’s top economic planner said on Sunday it would reduce some renewable energy subsidies in reforms intended to open the booming sector to market forces.

China has sought to scale back government support for renewable energy companies in recent years as the sector reaches critical mass.

It installed a record amount of renewable energy last year and has already surpassed a target to have at least 1,200 gigawatts of solar and wind capacity installed by 2030.

New clean energy projects completed after June 1 must sell electricity at rates determined by the market rather than at preferential rates previously used to support China’s energy transition, the National Development and Reform Commission (NDRC) said in a statement.

The NDRC urged energy producers to “push forward clean energy’s participation in market transactions”.

The commission also said it “encourages electricity providers and electricity buyers to sign multi-year purchase agreements and pre-emptively manage market risks”.

Beijing invested more than $50 billion in new solar supply capacity from 2011 to 2022, according to the International Energy Agency.

It has built almost twice as much wind and solar capacity as every other country combined, according to research published last year.

However, China’s grid is struggling to keep up.

Renewable supply is increasingly being blocked to prevent the grid from becoming overwhelmed, a process known as curtailment.

Beijing has rolled out a series of measures over the past decade aimed at weaning renewable energy providers off state financial support.

It ended subsidies for new solar power stations and onshore wind power projects in 2021.