A severe cold snap with snow unprecedented in 59 years recently occurred in many parts of China, including the metropolises of Beijing and Tianjin as well as Shaanxi, Shanxi and Shandong provinces, causing a significant increase in food prices in many cities and provinces nationwide.

Take Beijing as an example. The current prices of popular vegetables such as cabbage, radishes, cucumber and eggplant are 30 percent higher compared with prices before the cold snap.

Not only are food prices increasing, but other goods and services have increased from the end of last year, such as electricity, water, grain, industrial products, and international commodities including copper, natural rubber and sugar, along with home prices. Inflation expectations are therefore rising at the beginning of 2010, according to Economic Information Daily.

Most economists hold that China will not experience inflation in the near future, but others say it is too early to judge.

Fan Gang, Director of the National Economic Research Institute under the China Reform Foundation, said that China will not have obvious inflation in 2010. He said that inflation, measured by the consumer price index (CPI), can be reasonably forecasted. Prices are not likely to increase significantly, Fan said, because of excess inventories for various products including color TV sets, garments and mobile phones.

Fan, who also represents the academic community on the Monetary Policy Committee of the People's Bank of China, told China Business News that "preventing asset bubbles should be the most urgent task for China amid the current situation, in which numerous financial derivatives are popping up. An asset bubble is likely to appear in the face of soaring housing prices."

He Qiang, head of the Securities and Futures Institute at the Central University of Finance and Economics, told Money Weekly that "CPI growth by 2 percent may happen in China, which is not enough to trigger inflation." In 2009, China's CPI saw negative growth for nine consecutive months and only realized active growth starting in November. "This kind of price rise is normal and promotes economic growth," He said. "It also indicates that consumption was well stimulated.

"A normal price rise is quite different from the concept of hyperinflation," He continued. "The current daily necessities price rise is due to the fact that vegetables are not abundant in the winter season, which easily leads to price hikes for food, grain and edible oil. Rising prices are not a problem. The key is to raise people's income, thus stimulating further consumption." His opinion supports government policy to increase people's income this year.

How much the CPI will rise this year depends mainly on crop harvests in China and grain price fluctuation on the international market. He said that inflation in 2007 was mainly driven by soaring grain prices because the price of food accounts for one third of CPI. "If international grain prices stay relatively stable and China has strong harvests, inflation or hyperinflation will not occur in China," He said.

Cao Fengqi, Director of the Research Center for Finance & Securities at Peking University, said that right now inflation is merely an expectation -- whether it actually happens has yet to be seen. But at the very least, he said, the CPI will increase moderately in the first six months of the year. Macro-control by economic authorities will determine whether substantial inflation occurs in the second half of the year.

No country can keep CPI at zero growth. Usually, only CPI growth higher than 5 percent is considered real inflation, which represents an overall price rise and has an adverse impact on economic development.

Cao said that inflation expectations will influence actual inflation. If people expect prices to rise, they might make a run on stores. Such psychological panic could produce substantial inflation.

"Though China may not experience hyperinflation, the price rise trend for current daily necessities is quite obvious, indicating that a price rise has formed in 2010," said Yin Lizhong, Deputy Marketing Director of the Institute of Finance and Banking under the Chinese Academy of Social Sciences. "It is acceptable if CPI growth is under 5 percent, but it will be a disaster if CPI exceeds 10 percent, which represents hyperinflation."