BEIJING, CHINA: Inflation in China could touch a new high of 7% after fierce winter storms wreaked 'catastrophic' damage on crops and livestock, state media reports said Thursday (31 Jan).

The consumer price index (CPI) - the main gauge of inflation in China - has already been pushed to an 11-year-high of more than 6% in recent months due to shortages of essentials such as pork, a staple meat, and higher fuel prices.

However, the current spell of heavy snow and icy weather, which has practically crippled transportation of farm produce from the southern and eastern parts of the country, will worsen the supply crunch and push prices even higher.

The southern province of Hainan, for instance, has reported that 12,000 trucks loaded with vegetables have been stranded on highways bound for the capital Beijing and cities in south-western Chengdu.

Meanwhile, the bitter cold has also killed 15.8 million livestock, among them 874,000 pigs, and 14 million chickens, ducks and geese.

The unprecedented bad weather and transportation crisis prompted the official Xinhua news agency and Guangzhou Daily newspaper to run reports predicting that January and February's CPI could hit 7%- a level not seen since December 1996.

Top agricultural official Chen Xiwen gave a more conservative estimate Thursday (31 Jan), saying that inflation for last month should fluctuate around December's figure of about 6.5%.

But he warned that the economic fallout could worsen if the snow storms persist for a longer period, or if they move northwards.

"The impact (of the storms) on fresh vegetable production was catastrophic in certain areas," Chen, director of the Chinese Cabinet's Office of the Central Leading Group on Rural Work, said at a press conference.

Regions hit by the worst winter storms in some 50 years provide the bulk of China's winter fruit and vegetable production, he said.

"As for the impact on the whole year's grain production, we still have to wait and see as we are not sure how long the storms would last or whether they would move to the north," he said.

Some cities hit hard by the weather crisis, such as Changsha and Wuhan in central-south China, are already reporting a doubling of prices for vegetables.

Even cities unaffected by the extreme snowfall, such as Beijing, are reporting price increases of between 20% and 50% for vegetables such as cabbage, radish, eggplant and cucumber.

The government is also fretting over the supply of energy, particularly of coal, which accounts for almost two-thirds of the energy mix in China.

Even before the recent storms disrupted coal deliveries to power stations, the country had been experiencing a creeping power shortage sparked in parts by a nationwide campaign to close down small, unsafe coal mines and the industry's unhappiness over government caps on energy prices.

State television yesterday showed President Hu Jintao braving temperatures of minus 20 deg C to make a personal appearance at coal mines and power generating plants in northern Shanxi and Hebei provinces.

He was shown chatting with workers and rallying them to put the 'people's interests first' by stepping up coal and power production.

The winter storms lashing China have so far caused direct economic damage worth up to 32.7 billion yuan (US$4.55 billion).

This figure could go much higher if workers are unable to return to the factories on time after the Chinese New Year break. (By CHUA CHIN HON/ China Daily/ ANN)